Bank Austria Annual Report 2000

P r e s e n t s i t s R e p o r t f o r

2000

A n n u a l R e p o r t

2000

Bank Austria at a Glance

Bank Austria shares (31 December) 2000 1999

Year-end price of ordinary shares in w 58.60 56.00High / low closing price during the year 65.20 / 42.03 59.68 / 36.60

Year-end price of participation certificates in w * 46.50High / low closing price during the year 50.02 / 38.00 52.00 / 30.10

Number of shares outstanding 114,000,000 114,525,588

Number of participation certificates outstanding * 1,991,345

Dividend per share in w ** 1.02

Basic earnings per share in w in accordance with IAS 5.17 4.45

Diluted earnings per share in w in accordance with IAS 5.17 4.45

Price/earnings ratio (ordinary shares) 11.3 12.6

Price/earnings ratio (participation certificates) * 10.4

Average daily turnover in Bank Austria equities in w m 24.4 19.4in % of average daily turnover on the Vienna Stock Exchange 29.5 22.3

Market capitalisation in w bn 6.68 6.51

Key performance indicators 2000 1999

Return on equity after taxes (ROE) 13.1 % 11.9 %

Return on assets (ROA) 0.39 % 0.39 %

Cost/income ratio 66.7 % 71.7 %

Risk costs / risk-weighted assets 0.83 % 0.52 %

Total capital ratio 10.3 % 8.7 %

Tier 1 capital ratio 6.1 % 5.9 %

Rating (February 2001) Long term Short term

Moody’s Aa2 P-1

Standard & Poor’s AA+ A1+

* An offer was made to exchange participation certificates for ordinary shares in the period from 23 February 2000 to 22 March 2000. The remaining participation certificates were called in against payment of cash pursuant to a resolution passed at the Annual General Meeting held on 26 May 2000.

** The ordinary shares of Bank Austria exchanged for HypoVereinsbank shares are entitled to a full dividend for the year 2000. The dividend will be paidby HypoVereinsbank.

Income statement (in 3 m) 2000 1999 Change

Net interest income after losses on loans and advances 1,574 1,634 – 3.7 %

Net fee and commission income 862 777 + 11.0 %

Net trading result 137 187 – 26.9 %

General administrative expenses 2,159 2,149 + 0.5 %

Consolidated net income 592 512 + 15.6 %

Selected balance sheet f igures (in 3 m) 2000 1999 Change

Total assets 165,019 139,999 + 17.9 %

Loans and advances to customers after loan loss provisions 79,512 72,438 + 9.8 %

Primary funds (including subordinated capital) 89,360 71,289 + 25.3 %

Shareholders’ equity 4,615 4,441 + 3.9 %

Capital resources according to BIS (in 3 m) 2000 1999 Change

Core capital (Tier 1) 4,880 4,548 + 7.3 %

Supplementary elements (Tier 2) 3,821 2,789 + 37.0 %

Tier 3 873 651 + 34.1 %

Total net capital resources (Tier 1 to Tier 3 after deductions) 9,093 7,345 + 23.8 %

Staff and off ices 2000 1999 Change

Staff numbersBank Austria AG / Creditanstalt AG /Bank Austria Creditanstalt International AG 13,442 13,816 – 2.7 %Bank Austria 18,787 19,032 – 1.3 %

in Austria 14,766 15,129 – 2.4 %abroad (excluding Poland = 9,086) 4,021 3,903 + 3.0 %

Offices 631 655 – 24in Austria 518 523 – 5abroad (excluding Poland = 391) 113 132 – 19

Highlights of the 2000 Financial Year

February / March Conversion of participation certificates into ordinary shares.

March Announcement of preliminary 1999 results of the Bank AustriaGroup, for the first time in accordance with IAS.

Group on track to meet medium-term targets with record profits.

June After repurchase of own shares (1.21%), share capital is repre-sented by 114,000,000 ordinary shares.

17 July Successful introduction of a joint systems platform for Bank Austria and Creditanstalt.

22 July Announcement of the integration of HypoVereinsbank (HVB) and Bank Austria (BA).

July Bank Austria takes majority interest in the Polish bank PowszechnyBank Kredytowy (PBK); the local Bank Austria Creditanstalt unit ismerged into PBK later in the year.

10 August Bank Austria’s Supervisory Board votes in favour of joining forceswith HypoVereinsbank.

September Exchange ratio of one for one confirmed after detailed due diligence process.

September Bank Austria again recognised as “best bank in Central and EasternEurope”.

13 September A statement by the Austrian Takeover Commission does not raiseany objections to the integration of Bank Austria and HypoVereins-bank.

27 September Extraordinary General Meeting of Bank Austria passes resolutionsapproving the multi-stage plan for the “merger at shareholderlevel” by an overwhelming majority (99.8%).

6 November Constituent meeting of the Supervisory Board of Bank Austria (new).

7 November Bank Austria Creditanstalt International merged into Bank Austria AG.

15 November European Commission gives the green light to the integration of HypoVereinsbank and Bank Austria.

7 December Transfer of Bank Austria (new) to HVB takes legal effect with the entry into the Commercial Register.

First common strategy conference in the new HypoVereinsbank Group.

2 February 2001 First day of trading in HVB shares on the Vienna Stock Exchangeand one-for-one exchange of Bank Austria shares for HypoVereinsbank shares.

Key Figures and Group Structure Bank Austria at a Glance 2

Highlights 4

Major Companies of Bank Austria 6

Organisation Chart of Bank Austria 8

Supervisory Board and Managing Board of Bank Austria Aktiengesellschaft 10

To Our Business Partners Chairman’s Statement 15

New Dimensions for the Bank 2000 – a Leap into New Dimensions 18

and its Customers Bank of the Regions in the Heart of Europe 23

Bank Austria Shares 25

Development and Perspectives Market Situation and Operating Environment 32

… of the Group (Management Report) Development of Bank Austria in 2000 34

Events after the Balance Sheet Date and Outlook 40

… and of the Business Segments Domestic Private Customers and Professionals 44

Domestic Corporate Customers 54

International Business 64

Financial Markets 78

Equity Interests 85

Transaction Bank, Services Information Technology 96

and Resources Ecology = Rational Management 106

Corporate Communications 109

Human Resources 112

Group Reporting in accordance with IAS Contents 120

Consolidated Financial Statements 122

Notes to the Consolidated Financial Statements 126

Risk Report 158

Information required under local law 169

Concluding Remarks of the Managing Board of Bank Austria 177

Report of the Auditors 178

Report of the Supervisory Board 180

Supplementary Information Glossary 184

Quarterly Data 187

Supervisory Board and Managing Board of Bank Austria AG (changes in 2000) 188

Bank Austria Group Offices 193

Contacts, Imprint 198

Contents

Components required by IAS

Consol idated companies

Companies valued at equity

Other companies

Major Companies of the Bank Austria Group

6

Bank Austria AG

Domestic

Asset Management GmbHBA/CA-Leasing GmbHBA Handelsbank AGBA Wohnbaubank AGBank Austria Treuhand AGCA IB Investmentbank AGCAPITAL INVEST die Kapitalanlagegesellschaft

der Bank Austria/Creditanstalt Gruppe GmbHRINGTURM Kapitalanlagegesellschaft mbHVISA-SERVICE Kreditkarten AG

WAVE Solutions Information Technology GmbH

Adria Bank AGInvestkredit Bank AGOesterreichische Kontrollbank AGUnion Versicherungs-AG

Allgemeine Baugesellschaft-A. Porr AGEuropay Austria Zahlungsverkehrssysteme GmbHInformations-Technologie Austria GmbHNOTARTREUHANDBANK AGÖsterreichisches Verkehrsbüro AGVereinigte Pensionskasse AGWIENER STÄDTISCHE Allgemeine Versicherung AGWIGAST GmbH

7

International

BA/CA-Asset Finance Ltd., GlasgowBA/CA d.d., LjubljanaBA/CA-(Schweiz) AG, ZurichBA/CA-American LLC, New YorkBA/CA-Asia Ltd., Hong KongBA/CA-Capital Management Ltd., Hong KongBA/CA-Croatia d.d., ZagrebBA/CA-Czech Republic a.s., PragueBA/CA-Deutschland AG, MunichBA/CA-Hungary Rt., BudapestBA/CA-Romania S.A., BucharestBA/CA-Slovakia a.s., BratislavaBank Austria Cayman Islands Ltd.CB BA/CA-(Russia) ZAOJSCB BA/CA-Ukraine, KievPowszechny Bank Kredytowy S.A., Warsaw

B.I.I. Creditanstalt International Bank Ltd.,Grand Cayman

Banco B.I. Creditanstalt S.A., Buenos AiresBanco BBA-Creditanstalt S.A., São PauloCAC-Leasing a.s., Prague

BA/CA-(Singapore) Ltd., Singapore

Creditanstalt AG

Asset Management GmbH *BA/CA-Leasing GmbH *BANKPRIVAT AGCA Wohnbank AGCAPITAL INVEST die Kapitalanlagegesellschaft

der Bank Austria/Creditanstalt Gruppe GmbH *

CA Betriebsobjekte AG

Adria Bank AGBank für Kärnten und Steiermark AGBank für Tirol und Vorarlberg AGBausparkasse Wüstenrot AGCA Versicherung AGInvestkredit Bank AGOberbank AGOesterreichische Kontrollbank AG

Informations-Technologie Austria GmbH

AWT Internationale Handels und Finanzierungs AGCA Bau-Finanzierungsberatung GmbHDiners Club Austria AGFactorBank AGGrundstücke- und Gebäudeverwaltungs-AGLambacher HITIAG Leinen AGM.A.I.L. Finanzberatung GmbHÖsterreichische Hotel- und Tourismusbank GmbHUNIVERSALE-BAU AGWienerberger Baustoffindustrie AG

A list of significant equity interests of Bank Austria including details of the interests held is given on pages 152–154.

100%

* valued at equity in the sub-group financial statements of Creditanstalt

8

Organisation Chart of the Bank Austria Group (March 2001)

SupportServices

Corporate Customers and MultinationalCorporates

Private Customers and Professionals

International Markets

Randa Samstag Werhahn-Mees Hemetsberger

Group Public Relations

Multinational Corporates,Corporate and Trade Finance

Product Management and Marketing

Group Treasury and Financial Markets

Group Internal Communications

Corporate Customers Sales Management Coordination and Processing

Emerging Markets Investments

Group MarketingCommunications

Infrastructure,Public Sector

Customer Help Desks Global Capital Markets,Sales & Research

Secretariat of theManaging Board

Global FX andInternational Coordination

Group Strategy,Research and Management Support

Equity Trading

Bank Austria AGDomestic CorporateCustomers/Sales

Bank Austria AGDomestic PrivateCustomers andProfessionals/Sales

BA/CA-Leasing GmbH

BA Handelsbank AG

BA Private Equity GmbH

CA IB Investmentbank

DATA AUSTRIA Datenverarbeitungs GmbH

Bank Austria Finanzservice GmbH

Support Services

Hampel

Corporate Customers

Nageler


Danzmayr

Human Resources

Support Services

Internal Audit*

Regional sales units Regional sales units

SKWB-Schoellerbank**

Creditanstalt AG

Managing Boardresponsibilities

Group functions

Sales units

Special ised subsidiar ies

Funct ional subsidiar ies

Regional bankingsubsidiaries

* reports to full Managing Board** integration planned for 2001

Bank Austria AG

9

Equity Interests,Asset Management and Human Resources

Real Estate Finance andReal Estate Customers,Group Finance

Risk Management Organisation and IT Central and Eastern Europe

Kadrnoska Zwickl Mendel Haller Hampel

Equity InterestManagement

Real Estate Finance andReal Estate Customers

Credit ManagementDomestic

Organisation Consulting,Org/IT Management,Group Purchasing

Retail Banking CEE

Human Resources Group Finance and Risk Control

International Credit Management

Central Project Office,e-Business Project

Corporate Banking CEE

Internal Audit* Special AccountsManagement

Group PaymentTransactions

Operations Services CEE

Legal Affairs Strategic Credit RiskManagement

Group Securities Services

Capital Invest

Asset Management GmbH

BANKPRIVAT

BA Wohnbaubank AG

WAVE Org/IT Competence Centre

IT-Austria Computer Centre

KSB Services

Bank of the Regions/CEE

* reports to full Managing Board

Region 3CroatiaSloveniaRomaniaBulgaria

Region 2Czech RepublicSlovak RepublicHungary

Region 1Poland

10

Supervisory Board (since 1 January 2001*)

Chairman Albrecht SchmidtSpokesman of the Board of Managing Directors, Bayerische Hypo- und Vereinsbank AG

Deputy Chairman Rudolf HumerChairman of the Managing Board, P Beteiligungs Aktiengesellschaft

Members Erich BeckerChairman of the Managing Board, VA Technologie AG

Lino BenassiChief Executive Officer, Banca Intesa SpA

Adolf FrankeMember of the Managing Board, Westdeutsche Landesbank Girozentrale

Paul HasslerCertified Public Accountant

Gerhard MayrExecutive Vice-President Pharmaceutical Operations, Eli Lilly & Company

Dieter RamplMember of the Board of Managing Directors, Bayerische Hypo- und Vereinsbank AG

Eberhard Rauch Member of the Board of Managing Directors, Bayerische Hypo- und Vereinsbank AG

Appointed by the Employees’ Council Hedwig FuhrmannChairman of the Employees’ Council

Wolfgang HeinzlFirst Deputy Chairman of the Employees’ Council

Adolf LehnerSecond Deputy Chairman of the Employees’ Council

Kornelia UrbanSecond Deputy Chairman of the Employees’ Council (until 16 January 2001)

Heribert KruschikMember of the Employees’ Council (until 16 January 2001)

Wolfgang LangMember of the Employees’ Council

Thomas SchlagerMember of the Employees’ Council

Representatives of the Supervisory Authorities

Commissioner Doris Radl

Deputy Commissioner Bernhard Bauer

State Cover Fund Controller Alfred Katterl

Deputy State Cover Fund Controller Christian Wenth

Trustee pursuant to Mortgage Bond Act Günther Pullez

Deputy Trustee pursuant to Mortgage Bond Act Alois Ramoser

Supervisory Board and Managing Board of Bank Austria Aktiengesellschaft

11

Managing Board (since 6 November 2000*)

Chairman and Chief Executive Officer Gerhard Randa

Deputy Chairman and Deputy Chief Executive Officer Karl Samstag

Members Wolfgang Haller

Erich Hampel

Wilhelm Hemetsberger(since 17 February 2001)

Friedrich Kadrnoska

Wolfram Littich(until 16 February 2001)

Michael Mendel(since 8 December 2000)

Kai Werhahn-Mees (since 8 December 2000)

Franz Zwickl

* The integration of Bank Austria and HypoVereinsbank was carried out in several steps involving changes in the corporate structure pursuant tocompany law. These steps are explained on page 25 of this Annual Report. As a result, several changes took place in the composition andresponsibilities of the Supervisory Board and the Managing Board of Bank Austria during the reporting year. A detailed list including the intermediatestages is given in the section on “Supervisory Board and Managing Board of Bank Austria AG” on pages 188 to 191 of this Annual Report.

Photographs on page 12 (from left to right):Top: Gerhard RandaMiddle: Karl Samstag, Kai Werhahn-Mees Bottom: Franz Zwickl, Friedrich Kadrnoska

Photographs on page 13 (from left to right):

Top: Erich Hampel, Michael Mendel Bottom: Wolfgang Haller, Wilhelm Hemetsberger

Ladies and Gentlemen,

Commenting on Bank Austria’s past business year has always been a pleasure

because the bank has developed very favourably in the ten years since it was estab-

lished. Let me briefly remind you that the Bank Austria Group was created through

the merger of Österreichische Länderbank and Zentralsparkasse in 1991 and was

strengthened by the addition of Creditanstalt in 1997. Today the Bank Austria Group

is easily the leading banking group in Austria.

Bank Austria is not alone in having developed further during the ten years of its

existence. The environment in which we live has changed completely, too. The most

decisive change was Austria’s entry into the European Union – life has been different

ever since. And of course we at Bank Austria have also broadened our outlook and

oriented ourselves towards Europe.

It is from this perspective that the integration with HypoVereinsbank, certainly the

most significant event in our corporate history, is to be seen. The chart on page 18 of

this annual report illustrates this better than mere words: with this integration we are

setting out towards new dimensions, advancing to the league of those players which

not only see business in Europe as the focus of their activities, but which actually set

the standards in this area.

Thus I am particularly pleased to address you here this year. I am pleased and

proud that we have succeeded in winning HypoVereinsbank as the best imaginable

partner. Under the Bank of the Regions concept, the guiding principle of the new

HVB Group, we will continue to be responsible for those markets, including Austria,

where we have traditionally maintained a strong presence. Within the HVB Group,

we as Bank Austria have been entrusted with the important responsibility for the

growth market of Central and Eastern Europe. The reason for this is certainly the fact

that, in many respects, we have shown a strong commitment to this area at an early

stage, long before EU enlargement.

So, what will change?

For our customers, the new constellation only offers advantages because we can

draw on more resources – in terms of products, services and financial strength – and

we have significantly widened the range of our capabilities by joining forces with

HypoVereinsbank.

For our shareholders, the advantages of the new situation have already become

tangible. Initially, the 1:1 exchange ratio – based on the average share prices 30 days

before the announcement was made – implied a premium of 34 per cent. As the

Bank of the Regions concept and the promised synergies met with a very favourable

response from the capital market, Bank Austria shareholders benefited from a sub-

stantial share price gain within a short time after the integration. This value enhance-

ment would have hardly materialised without the integration, despite our excellent

performance trend. You as “old” shareholders in Bank Austria have undoubtedly

benefited from a long-term increase in share value. As “new” shareholders in Hypo-

Vereinsbank you profit from this higher value and with the HypoVereinsbank share,

you are now holding a stock which offers potential for the future, enjoys high

liquidity and is included in all relevant European indices.

For Bank Austria Group staff it is certainly of the utmost importance that we

pursue a growth strategy. We aim to and will invest and expand in “our” markets,

that is, the increasingly interlinked Central and Eastern Europe. This calls for commit-

ment, flexibility and of course quality. Our bank’s staff have all of these qualities in

great measure, and they now find more opportunities for personal development than

ever before.

I would like to thank all of you, our customers, shareholders and staff, for having

accompanied us on our way. For the future I can promise you that we will continue

to pursue this successful path, in a dependable manner and with an even wider

range of services. We can thus offer you more varied and attractive opportunities in

the future.

Gerhard Randa

Bank Austria 1962–2000

Total assets in 3 bn (left-hand scale)

ZentralsparkasseNet income after taxes in 3 m (right-hand scale)

0

100

200

300

400

500

600

1,000

1,500

0

50

100

150

200

700

62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 HVB + BA

MergerZentralsparkasse / Länderbank

Bank Austria

Integration Bank Austria / Creditanstalt

2000 was a noteworthy year in the recent corporate history of Bank Austria.

A decade following the merger creating Bank Austria in 1991, the bank, together

with HypoVereinsbank, began writing a new chapter. A discreet approach was

taken with regard to initiating the integration of the two banks. Both sides carefully

examined the integration, and then quickly concluded the subsequent negotiations.

Once the shareholders gave their overwhelming approval and the supervisory

authorities their consent, the transaction was rapidly completed. Based on stock

market prices, the capital market obviously feels that the strategy and future out-

look of this integration will create additional value. Employees at both institutions

are also convinced that the integration will result in new opportunities for them.

We have joined the supra-regional HVB Group in order to work together as the

“Bank of the Regions in the heart of Europe”. For Bank Austria, the integration does

not represent a turning point, but rather a consequent step forward in its develop-

ment. We are again moving to the next higher dimension in a consistent manner. Our

initiative is based on two fundamental goals, which are closely related to each other:

For one thing, we want to ensure that we – as a company – have the manœuvring

room and the resources which are necessary to realise our ambitious plans in a

competitive international environment. Acting alone, we would soon have come up

against our own limitations. This applies particularly to the growth of banking

activities in the countries of Central and Eastern Europe. Bank Austria has assumed

New Dimensions for the Bank and its Customers

18 New Dimensions for the Bank and its Customers

19

the responsibility – as a competence centre of the HVB Group – for using this large

potential. Moreover, within the Group, we can combine our investments in future

technologies and at the same time take advantage of economies of scale. Most

importantly, the integration promises growth and efficiency: synergies result from

joint efforts, and not from a drive to oust each other from the market; growth

means a joint step forward.

For another, as a service provider, our integration into Europe’s third-largest bank

considerably increases the level of efficiency we can bring to our core business

activity, which is serving customers as a focused universal bank. The new structure

allows us to expand our geographical reach, and it enhances our international

standing, which benefits our internationally-oriented customers (economies of

scope). Within the new Group we are creating a supra-regional finance platform for

networked and innovative businesses. The markets we serve fit together like a puzzle.

In the closely interlinked economic region of Southern Germany/Austria/CEE, we are

the market leader, based not only on size but also in terms of our products and

services. We have roots in all of these countries, where we maintain both traditional

and modern sales channels. We have a supra-regional infrastructure and retain our

identity while providing assistance to our customers.

Thus within the HVB Group, Bank Austria fulfils an economic function for both

Austria and beyond, within an increasingly integrated Europe.

Continuity: extensive experience paves the way to the future

During the past ten years, Bank Austria was the driving force behind the process of

consolidation which took place within the Austrian banking industry. The first major

integration, which created Bank Austria in 1991, was the result of a merger between

“Zentralsparkasse und Kommerzialbank” and “Länderbank”, which were at that time

the third and fourth largest banks in Austria. Zentralsparkasse, known as “Z”, was

created as a municipal savings bank with a broad social agenda in Vienna in 1905.

Beginning in the 1960s, it rapidly developed into a universal bank. The bank focused

on the retail market, becoming the first bank in Austria to implement modern

computer technology and marketing methods on a large scale. Länderbank was

created in 1880, and became one of the most important financiers for large companies

in pre-war Austria. Following its nationalisation after the Second World War, Länder-

bank continued to play an important role in corporate banking and as an industrial

holding company.

The second major step to grow into larger dimensions was taken by the bank at

the beginning of 1997 with the purchase of Creditanstalt shares held by the


Growth initiative with the strength of

Europe’s third-largest bank

Supra-regional finance platform for a

market comprising 160 million

consumers

Republic of Austria. Creditanstalt, which was established in 1855 with the

participation of the Rothschild family, can look back on a long tradition as an

industrial bank and was at times one of the largest financial institutions in Europe.

In the 1950s it became a universal bank and operated at the same time as an

industrial holding company. In 1957, 40% of the bank’s capital was placed as low

denomination shares for small savers. In the seventies and eighties, Creditanstalt

built an international network. At the beginning of 1997, Creditanstalt, then the

second largest bank in Austria, was integrated with Bank Austria, concluding its

privatisation and almost doubling Bank Austria’s total assets.

With the integration of Creditanstalt, Bank Austria presented a business model

that is widely emulated today: it continued to maintain the two established brand

names, operating under uniform Group control and using a common infrastructure.

Following the integration process, the Group succeeded in further expanding its

market position. Thanks to the commitment and positive attitude of employees, the

bank was able to limit complications from the integration process. Our integration

experience has been clearly positive.

Closer to customers via the capital market

Bank Austria’s climb to become the leading universal bank in Austria took place

not only in quantitative steps, but was also linked with qualitative progress as well.

The pressure exerted by the capital market played a significant role in this regard.

This is also due in part to Austria’s relatively late accession to the European Union in

1995, and to the final privatisation of the major banks which had been nationalised

in 1945. Following the purchase of a majority interest in Creditanstalt in 1997 and

the sale of the state’s remaining shares in Bank Austria at the beginning of 1998,

the free float climbed to between 50% and 55%, and Bank Austria became the

country’s largest publicly traded share.

This orientation towards the capital market was connected to a far-reaching

modernisation process. The steps taken in this direction included creating a uniform

Group share; ensuring transparency in accounting by converting to IAS; converting

the company pension system from a complicated multi-tiered system to a defined-

contribution pension plan with contributions paid to pension funds; introducing

modern controlling systems and management methods with performance incentives;

and active investor relations activities providing the bank with important feedback

from the capital market. The capital market has brought us closer to our own

customers. With the new divisional structure introduced throughout the bank, and,

one level below, a more detailed segmentation of the market, we have a better

understanding of the needs of our target customer groups.


Successful introduction of a

two-brand strategy following the

integration of Creditanstalt

Value-driven control principles,

internal and external transparency,

incentives for greater flexibility

21

Medium-term growth path: promised/kept

During the previous decade, Bank Austria attained a new dimension through

internal and external growth. In this regard, consolidation did not imply simply

adding up total assets, but also increasing productivity. From 1990 to 2000, the

number of branch offices was reduced by 15%, and the number of employees

declined by 23% through normal staff turnover and measures which avoided social

hardships. In 2000, net income after taxes per employee was six and a half times

higher than the figure for 1990.

Bank Austria promised its shareholders that it would achieve specific medium-

term profitability and efficiency goals during the 1997 to 2001 period. Following a

brief detour in 1998 (caused by the emerging markets crisis), the bank remained on

track with regard to meeting its targets. The bank has already achieved its target

figures for 2001, and in some cases actually exceeded them. Return on equity after

taxes was boosted from 8.3% (1996: pro forma Bank Austria + Creditanstalt) to

13.1% in 2000 (target figure for 2001: 12%). Earnings per share increased from

1 2.90 in 1996 to 1 5.17 in the reporting year, which is clearly in line with target

figures for the future. The cost/income ratio fell during the same time period from

over 70% to 66.7% – without the changeover to IAS in 1998/99, this figure would

have already dropped to about 60%.

Excellence in core competencies

Some years ago the Bank Austria Group – similar to many other large banks –

identified “growth segments” and made it a priority to expand these value-added

intensive services. These include: firstly, the expansion of asset management

activities. Following a time lag, the trend away from savings accounts and toward

higher-yielding, higher-risk investments has arrived in Austria. Secondly, the advance

of capital market products as corporate financing tools, where we are increasingly

offering to medium-sized companies a level of expertise formerly available to major

corporates only, as well as structured products on the new issues side and in the

project finance field, by which the bank has made a name for itself in Austria and

abroad. Thirdly, electronic banking, today – in the second, multilateral generation –

Internet banking and the expansion of multi-channel sales. Fourthly, and last but not

least, the Bank Austria Group made it a priority to expand in the CEE countries at

an early stage, cautiously and selectively at first, but now to an ever growing

degree. Thus even before the integration with HypoVereinsbank, it defined its core

markets as the “increasingly integrated Central and Eastern Europe”.


Return on equity

1996 1997 1998

(IAS)

1999 2000 2001

Target: >12%

3

6

9

12

15

Cost/income ratio

1996 1997 1998

(IAS effect)

1999 2000 2001

Target: <65%64

66

68

70

72

74

Earnings per share

in 3

0

1

2

3

4

5

6

1996 1997 1998

(IAS)

1999 2000 2001

Target:1 5.81

Budg

et 2

001

In view of the economic upturn of the past few years and increasing demands

faced by Austria’s leading international bank, Bank Austria reached the limits of its

narrow domestic market and of the ability to further grow on its own. The threshold

for success has again shifted higher. 2000 was the year of the New Economy. While

the significance of the New Economy was viewed in much more realistic terms at

the end of the year than at its beginning, one fact remains: the Internet is

dramatically changing the banking industry. Open, cross-regional platforms are

creating unprecedented price transparency and promoting the efficient use of

information. In this environment, banks can no longer rely on customer loyalty and

exclusive sales agreements. In addition, non-banking competitors are forcing their

way into the banking business, and the value-added chain is breaking up. Extremely

large amounts are needed for investments.

At the same time, customers are also becoming more international, and the

single European market will soon be enlarged. Trade with CEE countries is also

increasing. Against this background, it is not sufficient to operate via a loose

network of cooperative arrangements. The establishment of an extensive office

network purely through organic growth takes time, and is limited by local customer

loyalty. Accelerated “external growth” via an acquisition policy requires a sufficient

ability to bear risks and thus access to capital. The size of the bank also plays an

indirect role in the corporate customer business. With the advance of capital

market products as corporate financing tools, placement power and capital market

standing are becoming factors essential to success.

HypoVereinsbank and Bank Austria – ideal partners

A large-scale investment and growth initiative – only such an initiative will meet

with success – would simply not have been possible with the domestic capital

market and the then-existing shareholder structure. The profitability requirements

of international investors left us with the alternative: growth or downsizing. In

addition, the debate within the EU with regard to public-sector guarantees has long

pointed to the loss of the deficiency guarantee provided by the City of Vienna –

with the inevitable impact on the bank’s rating – and was another important factor

considered in the decision.

We found the ideal partner in the form of HypoVereinsbank. The two banks’

leading market positions on their respective home markets, the regional and cultural

closeness they share, as well as the experience each bank had already made with

regard to integration projects, prepared the way for a partnership. However, the key

factor was the broad agreement between the two banks on the strategic vision for

modern banking operations as expressed in the “Bank of the Regions” strategy.


New technologies are changing

the banking sector and require

large-scale investments

A banking infrastructure for an

increasingly integrated Europe

Essential to success: capital market

standing and placement power

An excellent strategic and

cultural fit

23

The Bank of the Regions strategy combines regional proximity to customers with

the competence and efficiency of a focused universal bank. This strategy differs both

from the centralised approach taken by many major banks and from the global

investment banking model, and it represents a strategic response to the increasing

irrelevance of national borders.

Today Europe is a highly-liberalised single market, and new technologies are

further enhancing transparency. But Europe is also a network of regions with close

trading relations. In this context, regions are defined by social and cultural inte-

gration strengths as well as by economic concentration.

Our customers live in these various regions. We will therefore serve them on a

regional basis, via decentralised units with a profound understanding of local

markets, units which maintain their local identities, benefit from an efficient deci-

sion-taking process and have extensive responsibility for regional management

(cf. chart ➀ ). This strategy values well-established brand names. For example, in

Austria we will continue to operate under the brand names of Creditanstalt and

Bank Austria.


The “Bank of the Regions” strategy

1 decentralised customer service based on entrepreneurial initiative and responsibility, relying on established brand names rooted in the local environment...

5 and based on a common IT platform

4 sharing expertise in business segments and core competencies

3 a uniform group strategy, efficient capital allocation and risk management,

2 with the size advantages offered by a major international bank

Regional proximity to 8 million

customers

Bank of the Regions in the Heart of Europe

Regional and cultural closeness to customers, or “relationship banking”, is not

sufficient on its own. Companies operate on a supra-regional basis, financial markets

are linked with each other around the globe and an international approach is also

taken with regard to asset management. The HVB Group is the supra-regional

structure that links together all of the various decentralised units (➁ ). As the third

largest bank in Europe, the Group also ensures a first class standing on the global

capital market, along with strong placement power.

The HVB Group pursues a uniform strategy (➂ ) and unlocks synergies which

result from combined investment efforts and infrastructure sharing. Professional risk

management based on Group-wide standards and the centralised allocation of

equity capital provide a basis for generating business volume in line with designated

core competencies. The Group thereby fulfils the requirements of a focused universal

bank which is clearly committed to serving its customers, including the market

segment comprising medium-sized companies.

Moreover, the respective comparative strengths are brought together within the

Group. Teams of experts operating in the international capital market, for example,

work closely together, benefiting from each other’s expertise (➃ ). In line with the

“integrated corporate finance bank” concept, they make their products and

knowledge available to regional companies.

The decentralised units of the Bank of the Regions will also benefit from the com-

mon IT platform (➄ ) which is currently being created. In view of the challenges

posed by new information channels and electronic banking, this common IT

platform is key to the Group’s strategy. Existing initiatives are being combined, and

then implemented with the strong backing of the entire Group. This is the only way

to cross the tremendous investment threshold in the e-business segment.

We anticipate that the overall cost basis within the Group will be reduced by

about 1 500 m by the end of 2003. The integration of Bank Austria and HVB will

account for 1 320 m of these cost savings, while the integration of Bank Austria and

Creditanstalt will account for 1 175 m in cost savings. Added to this are synergies

on the income side resulting from the joint use of growth potential.

The HVB Group claims to be the market leader in the heart of Europe – along the

very line that once separated Western and Eastern Europe – which now comprises

an increasingly interlinked market of 160 million consumers. On account of its

integration into the HVB Group, the Bank of the Regions strategy gives Bank Austria

the opportunity and the resources to continue its success story as the leading bank

in Austria with its distinct brands, and as Bank of the Regions in the countries of

Central and Eastern Europe.


Bank Austria’s success story continuing

within the HVB Group

Decentralised and centralised tasks

Group-wide risk and capital

management

Sharing of expertise at an international

level

Common IT platform

Synergies reduce costs and enhance

earnings

25

With a view to finding a sound organisational structure for the integration

process as quickly as possible, HypoVereinsbank and Bank Austria selected a

transaction model based on the exchange of shares at a shareholder level. This

model was best suited for fulfilling the criteria of economic efficiency, transparency

and rapid implementation. It was very effective in reducing the need for equity

capital, especially as the exchange of shares stabilised the Group’s Tier 1 capital and

even helped to improve the Tier 1 capital ratio (from 5.7% to 5.8%). The model

thus convinced the rating agencies and preserved the undisclosed reserves of the

new group as a basis for further acquisitions and investments.

A number of measures pursuant to company law were assembled as a package

and presented to the public for the purpose of implementing the strategy. The

shareholders approved the individual measures at their 10th, extraordinary general

meeting on 27 September 2000. The measures were in each case supported by an

overwhelming majority of votes. As the national supervisory authorities and the

European Commission did not raise any objections either in regard to cartel law or

on other grounds, the multi-tiered plan was quickly implemented.

In an initial preparatory phase the banking business of Bank Austria (old) was

spun off and absorbed by Sparkasse Stockerau as at 7 November 2000 without any

increase in capital, and the name of Sparkasse Stockerau was changed to Bank Austria

Aktiengesellschaft (new). The corporate shell of the old Bank Austria operated as

BA Holding AG and held the shares in Bank Austria (new). Sparkasse Stockerau, i.e.

the subsequent Bank Austria (new), was provided with adequate capital resources

through the contribution of the shares in Creditanstalt AG. Bank Austria Creditanstalt

International AG was at the same time merged into Bank Austria (new).

In the second stage, BA Holding AG transferred its shares in Bank Austria (new)

as a contribution in kind to Bayerische Hypo- und Vereinsbank AG against shares in

HypoVereinsbank at a ratio of one for one. This contribution took effect when the

increase in the capital of Bayerische Hypo- und Vereinsbank AG was entered in the

trade register on 7 December 2000 (as at the day of the contribution, i.e. 1 January

2000). In return, BA Holding AG received 114 million shares in HypoVereinsbank AG

on 8 December 2000.

The last step in the realisation of these plans took place on 2 February 2001 with

the merger of BA Holding AG into Bank Austria (new), which took effect as at

31 December 2000. The shareholders of Bank Austria received shares in Bayerische

Hypo- und Vereinsbank at an exchange ratio of one for one, and thus became direct

shareholders of HypoVereinsbank. The shares in HypoVereinsbank have been listed

on the Vienna Stock Exchange since 2 February 2001.


HVB BA

HVB BA Holding

BA (new)

BA (new)

<100%*

114 m HVB shares

HVB

BA

* Registered shares held by AVZand the Employees’ Council Fund

Init ial posit ion

First step: spin-off

Second step: contribution

Third step: merger

HVB BA Holding

Bank Austria Shares

Transaction structure

With a c lear ownership structure into the HVB Group

In the just under ten years of Bank Austria’s existence, its ownership structure

has undergone a profound change. While in 1991 the public sector (in a broader

sense) still maintained an ownership interest of 73% in the bank, in 2000 Bank

Austria AG was a completely privately-owned company. The key years in this

development were 1997 and 1998, when the free float of the bank’s shares

exceeded the 50% mark following share capital increases and the conversion offer

made to Creditanstalt shareholders. Most recently the free float stood at 52.7%

(calculated as a residual figure), somewhat less than during the previous year

(55.0%), in part on account of the buyback of shares.

In the course of 2000, and independently of the integration with HypoVereins-

bank, Bank Austria carried out a number of equity capital measures which had

been included in the bank’s medium-term plans. With the conversion and

subsequent calling in of participation certificates outstanding, as well as the share

buyback programme, the bank concluded a long series of capital measures begun

with the acquisition of Creditanstalt in January 1997, and realised its objective of

introducing a uniform Group share.

During the period from 23 February 2000 to and including 22 March 2000,

holders of participation certificates were offered the opportunity (pursuant to

Section 102a (3) of the Austrian Banking Act) to exchange on a voluntary basis the

1,991,345 participation certificates then outstanding for ordinary shares in Bank

Austria with an additional payment of ATS 66 per share. Many holders of

participation certificates took advantage of this offer, and exchanged 870,543

certificates (representing 43.72% of the participation capital) for ordinary shares.

Pursuant to a resolution passed at the 9th ordinary Annual General Meeting held

on 26 May 2000, the remaining participation capital was called in against cash

compensation, which took effect on 2 June 2000.

On 22 May 2000, in a second step, the Managing Board made use of its

authorisation to buy back shares, which had been granted by the 8th ordinary

Annual General Meeting on 19 May 1999. Pursuant to Section 65 (1) of the

Austrian Joint Stock Companies Act, the bank acquired 1,396,131 own shares, and

called them in pursuant to Section 192 (3) item 2 of the same Act. As a result of

these two measures, from 27 July 2000 onwards exactly 114,000,000 ordinary

shares remained.


Uniform Group share realised via

conversion and calling in of

participation certificates

114 million ordinary shares remain

following the buyback of shares

Change in ownership structure

27

During the course of the reorganisation of Bank Austria AG in 2000 as described

earlier, the publicly-traded Bank Austria AG (old) was renamed BA Holding AG and

its business operations spun off to Sparkasse Stockerau under the new name of

Bank Austria Aktiengesellschaft (new). The company’s name was then changed to

Bank Austria AG (new). Bank Austria AG (old) operated under the name of BA

Holding AG, and contributed the shares in Bank Austria AG (neu) to HypoVereins-

bank AG in return for new shares.

Following the conclusion of these transactions, HypoVereinsbank AG now holds

99.99% of the shares. Even within the new ownership structure, of course, Bank

Austria remains – via its parent institution – subject to the capital market’s

profitability requirements. In line with a value-oriented management approach, we

are working to achieve lean, efficient structures and efficient equity capital

allocation. Group planning has established as a medium-term goal a 15% return

on equity after taxes.

Former shareholders in Bank Austria Number of ordinary shares Interest in %

AV-Z Kapitalgesellschaft GmbH 28,081,895 24.6

WestLB 11,400,000 10.0

Wr. Städtische Group 6,300,000 5.5

Banca Intesa 3,640,966 3.2

Wüstenrot 1,952,129 1.7

Other major shareholders* 2,573,280 2.3

Free float 60,051,730 52.7

Total number of shares 114,000,000 100.0

… of which: bearer shares 88,008,105 77.2

Share capital in v 828,470,310

* Other major shareholders: Hamburg-Mannheimer Versicherung, Siemens AG, Bank of Tokyo Mitsubishi


0

20

40

60

80

100

1991 2000

50.3%

15.9%

22.5%

52.7%

24.6%

11.3%

Free float

Republic of Austria

Institutional and major investors

AV-Z

5 375 m(ATS 5,166 m)

5 828 m(ATS 11,400 m)

Historicalshareholder structure of Bank Austria AGHoldings in % of share capital

22.7%

0.0%

Subject to capital market’s profitability

requirements also in the new

ownership structure

Capital market welcomes the integration with HVB

Following a number of positive recommendations by analysts, the Bank Austria

share achieved a temporary high of 1 57.49 at the end of the first week of the new

year. During January, the share came under selling pressure from foreign investors,

and on 7 February 2000 it fell to its low for the year, 1 42.03. The price then recovered

on account of positive announcements made by the company (including the results

for 1999, and the intention to increase its interest in PBK), and also because the

market took a more positive view of the banking industry in general (company mergers,

Internet plans). In the remaining course of the first half year, the share price hovered

at around 1 50. Also contributing to this development was a presentation for analysts

entitled “BA Open House”, at which the corporate strategy was presented with a

newly defined core market of “Austria and CEE”. The share buyback programme

provided the share with a further boost, and lifted the price toward 1 55.

Altogether, during the first six months, turnover remained significantly below the

previous years’ level, as did turnover in the Austrian market as a whole.

The share price jumped following the ad hoc announcement of the integration

with HypoVereinsbank on 22 July 2000. On 18 July 2000, prior to any market

speculation, Bank Austria’s share price amounted to 1 49.15, and thereafter climbed

by 33% to a high for the year, 1 65.20, on 9 August 2000. Thus from the very

beginning, the market has reacted favourably to this “merger at a shareholder level”.

In retrospect, the period from the announcement on 22 July 2000 until the

exchange of shares on 2 February 2001 can be divided into three separate phases.

In the initial phase, the market took a cautious approach with regard to the actual

realisation of the transaction. The price differential between Bank Austria and HVB

shares, which reflected the likelihood of a one-for-one exchange, stood at between

6% and 10%. The spread, however, narrowed sharply when the Austrian take-over

commission did not come out against the transaction on 8 September 2000,

meaning – at least in the market’s eye – that a hurdle had been cleared. The second

phase, where the price differential hovered at around 2%, covered the period from

the extraordinary general meeting on 27 September 2000 to the time when the

European Commission and the cartel authorities approved the merger in mid-

November. In the final phase, shares in Bank Austria and HVB traded at virtually

identical levels, with no notable price deviations, even in daily trading.

The real increase in the price of the HypoVereinsbank share (and thus of the Bank

Austria share) in view of the integration is of greater significance than the relative

movement between the two shares slated for exchange. This is because the share price

is seen as reflecting the market’s assessment of the Group’s future in its new form. Unlike


Share price movements in the

first half of 2000

Share price rockets on announcement

of integration with HVB

Stabilisation of expectations and

smooth settlement of a 5 6.6 bn

transaction

29

mergers at other companies, the price of the HVB share remained at a high level. While

the price did decline temporarily in September on account of technical arbitrage trans-

actions, in the further course of the year the HVB share developed in line with the Euro-

Stoxx bank index. From the end of the year until results for the new HVB Group were

announced (including the pro-rata consolidation of Bank Austria in the income state-

ment, and the bank’s full inclusion in the balance sheet), the price of the HVB share

increased considerably. The stronger weighting given to the HVB share in European

benchmark indices, which was to be expected in view of Bank Austria’s inclusion and its

significant free float, also contributed to this development. The number of HVB shares

increased by 27% following the share capital increase against a contribution in kind.

Shortly after the integration, former holders of Bank Austria shares saw a strong

increase in the value of their shareholdings. Based on a share price of 1 67.0 (end

of February 2001) and compared with the average Bank Austria share price from the

beginning of the year until 22 July 2000, shareholders benefited from a price gain

of 35.1%. This actually slightly exceeded the “premium” of 34% that was calculated

at the time the announcement was made, based on average prices for the preceding

month and a one-for-one exchange ratio.

The smooth settlement of a demanding capital market transaction valued at

1 6.6 bn, the convincing “Bank of the Regions” strategy, and the expected synergies

were all received very favourably by the capital market, and leave room for further

share price increases.


Substantial premium for former

holders of Bank Austria shares

Bank Austria contributes to stronger

weighting of HVB share

HVB share priceBank Austria share price

Favourable reception in the capital market

in 3

40

45

50

55

60

65

70

75

January 2000 April 2000 July 2000 October 2000 January 2001

average

average

average

Market s ituation and operating environment

In 2000, banks operated in a generally favourable economic environment

which deteriorated somewhat as the year progressed. This contrasted with rising

commodity prices, a restrictive interest rate policy in the US and Europe, and general

weakness in international stock markets.

Dynamic growth of the world economy in the first few months of the year caused

the appearance of a number of (long-forgotten) cyclical factors which acted as a

brake and prompted monetary policy measures to counteract them: oil prices rose by

more than 200% to reach a peak in August (Brent crude from US$ 10.2 to US$ 33.4

per barrel). The US Federal Reserve further tightened its restrictive policy pursued

since November 1999 and raised interest rates three times during the year to achieve

a “soft landing”, suppress inflationary trends (second-round effects) and break the

link between stock market boom and consumption.

Leveraged by the strong US dollar, these events also had an impact on Europe. The

European Central Bank abandoned the policy of monetary expansion it had pursued

at the beginning of the year and raised its main refinancing rate in six steps from 3%

to 4.75%. In view of the steady trend in long-term bond yields, the euro yield curve

and thus also the Austrian yield curve flattened. The interest rate differential between

10-year Austrian federal government bonds and twelve-month money fell from 1.7

to 0.5 percentage points in the course of the year (see chart below).

Management Report of the Group

32 Management Report of the Group

Restrictive monetary policies

in the US and Europe

Flattening yield curve

10-year federal government bondstwelve-month money (EURIBOR)

Austrian interest rate trends

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

10-year federal government bonds

twelve-month money (EURIBOR)

1999 2000

in % p.a.

33

This interest rate development resulted in two opposing trends in the banking

sector: the usual pattern of delayed responses in the banking industry temporarily

improved interest rate margins in the deposits business (see section on Private

Customers and Professionals) in the first quarter; on the other hand, funding terms

and thus banks’ earnings from maturity transformation deteriorated significantly.

Austria’s economy benefited from a strong increase in private consumption,

primarily in the first half of the year. Moreover, 2000 was an exceptionally good year

for Austrian merchandise exports, which grew by 11.5% in real terms. Investment in

equipment rose by 5.9%, driven by the favourable economic trend and companies’

efforts to modernise and internationalise their operations. Although growth weakened

somewhat after the middle of the year (as a result of restrictive monetary and fiscal

policy influences as well as a temporary increase in inflation rates), GDP grew by

3.3% in real terms, a level close to the growth rate for the euro zone as a whole.

Austrian banks thus faced rising credit demand (+6.7%), a high savings ratio (holdings

of financial assets by private households increased by 1 15 bn) and large transaction

volumes. The trend towards securities investments and the advance of flexible equity

financing continued. Export financing activities and international project and acquisition

financing benefited from favourable economic trends and strengthening East/West ties.

The countries of Central and Eastern Europe (CEE-8) recorded economic growth

of over 4%. Overall, 2000 was thus a good year for convergence towards the EU

countries, though there were considerable differences. Hungary led the field with

5.3% growth, whereas Romania’s economy grew by only 1.8%. As a result of higher

oil prices and, in some countries, high levels of economic activity, inflation in the CEE

countries rose again. The strong increase in exports, especially to the EU, slightly

reduced their current account deficits. Based on substantial oil revenues, Russia

recorded the highest rate of economic growth since the transformation process started.

Another factor that had a strong influence on the banking industry in the year

2000 was the sudden change in sentiment on growth stock markets. After a bull

market in telecom, media and technology (TMT) stocks which lasted for 16 months

and was reflected not only in share prices but also in a wave of IPOs, the TMT sector

declined sharply from March onwards, and indices for growth and technology stocks

fell to below the levels seen before the boom started. The global links of the New

Economy with traditional economic sectors, in combination with rising interest rates,

led to a dramatic deterioration in the creditworthiness of numerous debtors, which

was not restricted to the US and the TMT sector (see section on Financial Markets).

Banks had to raise their risk provisions during the year.


Contrasting effects of interest rate

trend

Economic activity stimulates credit

demand, raising of funds and

international business

Convergence progress in the CEE

countries. Major economic differences

remain

Stock market slump and rising interest

rates affect credit quality

Development of Bank Austr ia in 2000

Consolidated income statement

Bank Austria’s results for 2000 meet the target figures and even exceed some of

the targets which the bank set for itself after the integration with Creditanstalt four

years ago. Consolidated net income for 2000 rose by 1 80 m or 15.6% to 1 592 m.

Earnings per share increased to 1 5.17, corresponding to the intermediate figure

on the target path (2001: 1 5.81). This increase is the net effect of a strong

improvement in operating income components (significant growth of net interest

income, substantially higher net fee and commission income, partly offset by

a decline in the net trading result) as well as an increase in the result of other

operating activities and a higher provisioning charge for the lending business.

Net interest income rose by 1 206 m or 10.1% to 1 2,240 m; this item

accounts for a large proportion of total income and was thus the main factor

determining the growth of results. The increase is based solely on interest components,

reflecting the interest rate trend that prevailed particularly in the early part of the

year. As a result of the change in the group of companies accounted for under the

equity method, the share of net income of such companies declined by 1 39 m or

18 % to 1 177 m.


Results in line with medium-term

plan

Individual items of the

income statement

+10.1%

+66.5%

+11.0%

–26.9%

+0.5%

+3.0%

+80.0%

+12.8%

Results of the Bank Austria Group

3 m

1999

2000

Net interest income

Losses on loansand advances

Net fee andcommission income

Net trading result

General administrativeexpenses

(of which: staff costs)

Result of otheroperating activities

Net incomebefore taxes

0 500 1,000 1,500 2,000 2,500

35

The net charge for losses on loans and advances, which had been con-

siderably reduced (by 1 354 m) in the previous year, rose again in 2000, by 1 266 m

or 66.5% to 1 666 m. The provisioning charge related almost exclusively to on-

balance sheet loans and advances and is to be seen in connection with the regional

and industry trends described above. In Austria, the deterioration in the risk

position led to a higher provisioning charge across the board (charge for losses on

loans and advances up by 1 238 m to 1 519 m). On the international side the

picture was mixed, reflecting differences in economic trends: in the US, specific risk

provisions were higher than expected (up by 1 55 m to 1 143 m), against the back-

ground of leverage ratios, interest rate developments and trends in dynamic key

industries. On the other hand, the risk position in the CEE countries remained at a

very low level (1 8 m) (see also notes 24 and 33 in the notes to the consolidated

financial statements).

In 2000, Bank Austria recorded an 11.0% increase in net fee and commission

income (up by 1 85 m to 1 862 m). Most of this increase came from the securities

business, including sales of mutual funds; in this sector net fee and commission

income rose by 1 70 m or 34.4% to 1 273 m, thus making the largest contribution

to the overall figure. Fees and commissions in the payments sector matched the

high level of the previous year (– 0.3% to 1 272 m). Stronger economic activity was

also reflected in the 37.3% increase in commission income from the lending busi-

ness to a total of 1 126 m and in the 3.8% growth, to a total of 1 134 m, in

commission income from foreign exchange, foreign notes and coins, and precious

metals business.

The net trading result for 2000 was 1 137 m, down by 1 50 m or 26.9% on

the previous year. All of the decline was due to equity-related business; this item

includes not only equity trading income in a narrower sense but also income from

equity positions held as current assets in connection with sales of companies.

Against the background of market developments, currency-related and interest

rate-related transactions showed satisfactory increases of 17.1% and 58.4%,

respectively. In this area, the increasing importance of business in CEE currencies is

becoming noticeable.

An important factor that enabled the Group to achieve good results for 2000

was the steady cost trend. General administrative expenses totalled 1 2,159 m,

an increase of only 1 10 m or 0.5% compared with the previous year. Staff costs,

the largest component, accounted for 57.5% of the total figure and increased by

3.0%. One-half of the growth of wages and salaries was offset by a decline in

expenses for post-employment benefits and a lower allocation to the provision for


severance payments and pensions. This reflects the transition from a defined

benefit plan to a defined contribution plan for future pension benefits at the turn

of 1999/2000 as well as the changes in the number and structure of employees.

Other administrative expenses, including current expenses related to computer

systems and advertising, were slightly lower (– 2.3%) than in the previous year.

The cost/income ratio, i.e. the ratio of general administrative expenses to

operating revenues (net interest income, net fee and commission income, and net

trading result), was reduced to 66.7% in 2000 (from 71.7% in the previous year).

The result of other operating activities increased by 1 110 m or 80% to

1 248 m. Amortisation of goodwill remained unchanged at 1 30 m and the balance

of other operating income and expenses deteriorated further. On the other hand,

results from current financial assets rose by 1 29 m or 69.0%. The largest

contribution to the strong growth of the overall figure came from the results from

financial fixed assets, which rose by 1 93 m or 54.6% to 1 263 m. This figure

includes the profits from the transfer of equity interests in non-banks to an entity

outside the sphere of influence of the Bank Austria Group: as at the end of

December 2000, about 25 companies were transferred to B & C Holding GmbH,

the subsidiary of a foundation which is independent of the bank, against profit-

sharing rights which evidence an entitlement to share in future profits from these

companies (see section on Equity Interests).

Taxes on income amounted to 1 47 m (1999: 1 40 m). Of the current income

tax expense, 41.5% related to international operations. Within the total figure, the

deferred tax expense was 1 6 m (1999: 1 38 m).

After deduction of minority interests of 1 23 m, or 3.7% of net income after

taxes (1 615 m), consolidated net income for the 2000 financial year was 1 592 m.


37

Balance sheet – structure and changes

In 2000, total assets of the Bank Austria Group grew by 17.9% to 1 165.0 bn.

This growth resulted from the expansion of current business and from changes

in the group of consolidated companies: Powszechny Bank Kredytowy S.A.,

Warsaw (PBK), in which Bank Austria held an interest of 56.6% at the end of the

year (after taking a majority interest and merging its own Polish subsidiary with

PBK), was consolidated for the first time as at the end of 2000. The consolidation

as at year-end has effects on the balance sheet – PBK accounts for about 4% of the

18% increase – but not on the income statement. A technical factor contributing

to balance sheet growth was exchange rate movements, above all the appreciation

of the US dollar against the euro.

On the assets side, contributions to the 1 25.0 bn balance sheet growth came

from loans and advances to, and placements with, banks (+ 1 10.0 bn) and loans

and advances to customers (+ 1 7.7 bn), a significant increase in trading assets

(+42.8% or 1 4.4 bn) and in financial fixed assets (+ 1 2.5 bn). The strongest con-

tribution to funding total assets came from resources entrusted to the Group by

customers: these rose by 1 18.1 bn or 25.4% to 1 89.4 bn, thus accounting for

over one half of the balance sheet total (customer deposits up by 1 11.2 bn, lia-

bilities evidenced by certificates up by 1 5.4 bn). Interbank liabilities rose by 1 5.7 bn

or 10.6%.


Total assets reflect internal and

external growth

2000

Structure of assets

in %

Increase in assets1999/2000

+/– 3 m

Cash, property and equipment, intangible assets, other assets

Loans and advances to, and placements with, banks

Loans and advances to customers

Trading assets and other current financial assets

Financial fixed assets

Total loan loss provisions (deduction)

–10

0

10

20

30

40

50

60

70

80

90

100 3.4%

23.9%

49.9%

10.9%

13.6%

–1.7%

5 165.0 bn

0 2,000 4,000 6,000 8,000 10,000 12,000

12.0%

34.1%

10.3%

35.6%

12.5%

21.6% increase in deduction

Assets

Loans and advances to, and placements with, banks increased by 34.1% to

1 39.4 bn, primarily those with maturities of less than one year. A special factor in

this context is that one half of the expansion is due to the spin-off of Bank Austria

Commercial Paper LLC and its transfer to HVB as part of structural changes. This

involved transfers from customer loans to interbank claims. Loans and advances to,

and placements with, banks account for 24% of total assets.

Loans and advances to customers rose by 10.3% to 1 82.3 bn and thus

represented just under one half of total assets. The expansion related mainly to

long-term loans (with remaining maturities of over 5 years), which represent 44%

of all loans and advances to customers.

Total loan loss provisions – disclosed on the assets side of the balance sheet

below loans and advances – were increased by 1 508 m or 21.6%. This is the result

of a higher net allocation of 1 741 m (1999: 1 380 m) and lower use (1 504 m) than

in the previous year (1 690 m). Moreover, translation differences and other changes

having no impact on the income statement in the total amount of 1 263 m

(compared with only 1 48 m in the previous year) increased the amount shown as

total loan loss provisons.

Trading assets totalled 1 14.3 bn at the end of 2000. The increase of 1 4.3 bn

or 42.8% compared with the previous year also reflects changes in current market

prices. More than half of this growth is due to fixed-income securities, the remainder

being accounted for by shares and investment certificates, interest rate derivatives

and other trading assets. Other current financial assets comprise holdings which

are neither classified as trading assets nor as financial fixed assets intended for

continuing use within the Group. Most of the increase of 1 450 m or 13.6% to

1 3.7 bn in this item, too, was accounted for by bonds and other fixed-income

securities, primarily those of public issuers.

The item financial fixed assets grew by 1 2.5 bn or 12.5% to 1 22.4 bn. Most

of this growth related to bonds and other fixed-income securities, primarily those of

issuers outside the public sector, while strategic holdings of shares were reduced.

As a result of the divestment policy (see section on Equity Interests), equity inter-

ests and properties rented to third parties, which were valued at cost, declined by

1 419 m and 1 61 m, respectively. The figure stated for shares in unconsolidated

subsidiaries was 18.1% higher than in the previous year.


39

Liabilities and shareholders’ equity

In 2000 amounts owed to banks increased by 1 5.7 bn or 10.6% to 1 59.1 bn.

Amounts owed to customers increased by double this amount (+ 1 11.2 bn or

26.6 %). A breakdown by product gives a clear picture of the trends on the liabilities

side which were outlined in the introduction to the management report: refinanced

export loans, which were granted on a trust basis at third party risk, expanded by

14.2%; savings deposits declined by 8%; sight and time deposits (all groups of

depositors) showed the strongest growth, rising by 53% and thereby underlining

the large transaction volumes and efficient cash management.

Within the liabilities evidenced by certificates (up by 1 5.4 bn to a total of

1 31.3 bn), debt securities issued as well as medium-term and short-term near-

money market instruments rose strongly.

Provisions are stated at 1 3.0 bn in the 2000 balance sheet, compared with

1 2.9 bn in 1999. Within this item, provisions for severance payments, pensions

and similar obligations, totalling 1 2.4 bn, are the largest item with the strongest

increase (+ 1 180 m or 8.0%). Allocations to provisions and the interest component

(1 276 m) were partly offset by pension payments (1 104 m). Other provisions

declined (– 1 162 m to 1 407 m) because 1 125 m was used for restructuring

measures.


2000

Structure of l iabil it ies and shareholders ’ equity

in %

Increase in l iabil it ies andshareholders ’ equity, 1999/2000

+/– 3 m

Amounts owed to banks

Amounts owed to customers

Liabilities evidenced by certificates

Provisions

Other liabilities

0

20

40

60

80

100

35.8%

32.1%

19.0%

1.8%5.0%6.3%

5 165.0 bn

10.6%

26.6%

20.7%

3.8%

9.4%

24.2%Shareholders’ equity, subordinated capital, minority interests

0 2,000 4,000 6,000 8,000 10,000 12,000

Shareholders’ equity

At the end of 2000, consolidated shareholders’ equity was stated at 1 4,615 m.

The increase (1 174 m or 3.9%) resulted from retained earnings, diminished by the

effect of the share buyback (– 1 74 m) as well as the conversion and redemption of

participation certificates (– 1 39 m). Currency translation as part of the consolidation

procedures also had a reducing effect (– 1 101 m).

Regulatory capital resources

The Bank Austria Group’s capital resources are calculated pursuant to the Austrian

Banking Act rules, which are in conformity with the EU Capital Adequacy Directive.

Tier 1 capital increased by 1 0.3 bn or 7.3% to 1 4.9 bn as compared with the end of

the previous year. Measured against the assessment basis (banking book) of 1 79.8 bn

(+3.5%) as defined in the Austrian Banking Act, the Tier 1 capital ratio is 6.1%. Supple-

mentary elements (Tier 2) are stated at 1 3.8 bn as at 31 December 2000, resulting in

net capital resources of 1 8.2 bn. The minimum capital requirement is 1 6.4 bn, thus

the excess coverage is 1 1.8 bn. The total capital ratio rose from 8.68% to 10.30%.

Events after the balance sheet date

Pursuant to the resolution passed at the extraordinary general meeting of Bank

Austria AG on 27 September 2000, BA Holding AG, as transferring company whose

shares were still listed in the ATX segment of the Vienna Stock Exchange at the

balance sheet date, was merged with Bank Austria AG and at the same time the

shares in HypoVereinsbank AG were transferred to the shareholders in BA Holding

AG. Shareholders in BA Holding AG thereby received one share in HypoVereinsbank

AG, Munich, for each share held. As part of this merger, which became effective

with its entry in the Austrian Register of Firms on 2 February 2001, the admission of

shares in BA Holding AG to trading on the Vienna Stock Exchange was revoked.

On 12 February 2001 the Managing Board of Bank Austria decided to spin off

the “International Trade Finance” operations of Bank Austria Handelsbank AG

(BAHB) and transfer these assets to Bank Austria Aktiengesellschaft (BA) with

retroactive effect as at 30 June 2000.

As part of the implementation of the integrated corporate finance concept, the

Managing Board decided at the end of January 2001 to merge CA IB Vienna, the

investment bank of the Bank Austria Group, into Bank Austria. This means that

treasury, equity trading and investment banking are combined into a Group function

within Bank Austria. In the course of these restructuring measures, Wilhelm Hemets-

berger, Chairman of CA IB’s Managing Board, joined the Managing Board of Bank

Austria on 17 February 2001 and assumed responsibility for International Markets.


41

Outlook

For the current business year we expect weaker growth early in the year to be

followed by a slightly rising trend. Especially in view of the economic slowdown in

the US, the macroeconomic environment in the current year will be somewhat less

favourable than in 2000. But in 2001, too, Austria will make almost full use of its

growth potential, with GDP forecast to increase by 2 1/2%. In the middle of the

year inflation will start to recede significantly, on account of the basis effect alone.

The countries of Central and Eastern Europe will again achieve strong economic

growth in 2001, even if some countries will experience a slightly weaker trend (see

table). Inflation should decline in this group of countries, too.

The moderate economic growth which is currently foreseeable could prompt the

European Central Bank to reduce key interest rates, though only to a small extent.

Long-term rates will probably rise somewhat in the second half of the year as

growth will slightly accelerate. Corporate banking activities are expected to benefit

from the interest rate movements seen around the turn of the year and so far this

year. In retail banking, our ambitious goal is to repeat the record results achieved

in the previous year. The trend towards securities and mutual fund investments will

continue although the past year made large numbers of investors familiar with the

risks of investing in equities. As far as the financial markets are concerned, there

are indications that stock markets will bottom out in the course of this year. These

trends are confirmed by the good overall results so far in 2001.

A major shift in Bank Austria’s assets and earnings structure will result in 2001

from the transfer to HVB of Bank Austria business units in the “rest of the world”

and, conversely, from HVB to Bank Austria in Central and Eastern Europe under the

“Bank of the Regions” concept. The transfer will take place at arm’s length, which

means that fair and objective values and valuation criteria will be used. On this

basis the asset position of the Bank Austria Group will be maintained. In the CEE

countries, the “doubling” of market and earnings opportunities and the realisation

of synergies is creating a strong basis both for further investment in the market

position and for the use of earnings potential.

Overall, therefore, we expect the earnings performance to remain favourable in

2001 and the years beyond.


Selected growth rates:

real GDP growth in %

2000 2001

USA 5.0 2.5

Japan 1.5 1.5

Euro zone 3.4 2.7

CEE-8 3.8 3.8

Austria 2000 2001

GDP growth 3.3 2.5

Private consumption 2.6 2.0

Investment in equipment 5.9 5.4

Investment in construction 1.6 1.9

Exports in a broader sense 7.6 5.0

Imports in a broader sense 6.3 4.7

CEE-8 countries 2000 2001

Poland 4.2 4.1

Czech Republic 2.6 3.5

Hungary 5.3 5.0

Slovakia 2.2 2.9

Slovenia 4.5 4.5

Bulgaria 4.5 4.0

Croatia 3.5 3.0

Romania 1.8 2.0

Source: Bank Austria Economics Department

Whilst retail banking plays a key role in Bank Austria’s development, it is also one

of the universal bank’s significant growth components as it accounts for 40% of

operating revenues. Bank Austria and Creditanstalt serve some 1.7 million

customers, which make the Group the undisputed market leader in Austria.

This business segment comprises the retail banking activities of Bank Austria and

Creditanstalt, the consolidated investment management companies, BANKPRIVAT,

VISA and the residential construction banks, as well as CA-Versicherung AG and

UNION Versicherung, both of which are accounted for under the equity method.

The subsidiary companies accounted for about one fifth of total results in 2000.

Business developed very favourably in the Private Customers and Professionals

division. A finely-tuned marketing strategy and the commitment displayed by

customer advisers enabled Bank Austria and Creditanstalt to take advantage of the

opportunities offered by the economic environment – opportunities resulting from

developments in interest rates and strong economic growth, as well as trends in

demand (investments in securities) and sales channels. In 2000 this segment’s

contribution to the Group’s results for the first time significantly exceeded the

relative level of equity capital committed: with net income before taxes totalling

1 157 m compared with 1 10 m in the previous year, this segment accounted for

24% of the Group’s overall results, the share of equity capital amounted to 10%,

which reflects the predominance of deposits relative to loans, a feature which is

common to retail banking operations. On account of the disproportionately strong

deposit business generated by this segment (relatively low capital requirement and

large business volume) the return on equity before taxes jumped from 2.2% to

35.7%. These developments in particular show that in view of the high business

volumes achieved by retail banking, even moderate changes in interest margins can

have major implications. This results in strong fluctuations in profits after the high

fixed costs have been deducted. The improvement in earnings is a result of the

trend in costs: general administrative expenses increased by only 6%, although in

addition to its day-to-day operations Bank Austria’s retail business was faced with

the transition to a common IT platform (see below). The cost/income ratio fell to

under 80% and is thus moving in the right direction. The bank has set itself the target

of reducing this ratio further to match the current average for the entire bank.

The increase in operating revenues in 2000 was achieved through net interest

income and net fee and commission income at a ratio of 3:1. Net interest income

rose sharply in the first few months of 2000 despite ongoing fierce competition on

terms and conditions, and continued to rise slightly during the remaining part of

the year. Net interest income improved by 26% or 1 169 m in 2000. Brisk activity

Domestic Private Customers and Professionals

44 Domestic Private Customers and Professionals

Key figures – Domestic Private

Customers and Professionals

1 m 2000 1999 Changein %

Net interest income 825 656 26 %

Losses on loansand advances – 93 – 87 7 %

Net fee and commission income 439 377 16 %

Net trading result 19 21 – 10 %

General administrativeexpenses – 1,022 – 963 6 %

Result of otheroperating activities – 12 7 n.a.

Net income before taxes 157 10 >100 %

Share of Group total 24 % 2 %

Risk-weightedassets (average) 10,407 9,571 9 %

Equity (average) 440 455 – 3 %


ROE before taxes 35.7 % 2.2 %


45

in securities business helped to boost net fee and commission income, which

increased by 16% or 1 62 m relative to the previous year.

This further strong increase in commission income resulted not only from the

continuing trend in favour of securities investments, but to a large extent from the

ongoing boom in demand for mutual funds. The structural shift toward higher-

yielding investments in 2000 was also supported by another development, namely,

the statutory elimination of anonymous savings accounts on 1 November 2000. The

bank’s sales network smoothly handled the necessary conversions without any

difficulties. Special counters were set up in branch offices and advisory times were

extended. Customer advisers at Bank Austria and Creditanstalt had earlier taken

advantage of this sensitive topic to answer customers’ inquiries by providing them

with information via the Group’s sales channels and in thousands of personal

contacts under the slogan “bank secrecy rules: offering the same level of discretion

as anonymous accounts”. One of the goals of this initiative was to help customers

become better acquainted with complementary investment products – from

“intelligent savings cards” and residential construction bonds offering tax incentives

to mutual funds. These products can be tailored to meet individual needs and

savings objectives more easily than through savings books alone.

The migration to a common IT platform on 17 July 2000 was undoubtedly the

key event of the year (cf. page 103). The successful implementation of this massive

“heureka!” project signifies a quantum leap forward for the bank, making it

possible to completely restructure the retail business activities of Bank Austria and

Creditanstalt. Both banks’ retail banking operations have been subject to uniform

strategic management since November 2000, and rely on a common back office

structure. By utilising central functions such as product management, marketing

and sales management, we are able to optimise the allocation of resources and free

additional capacity for direct customer support.

Comprehensive services and product know-how are also highly valued by our

business customers. Bank Austria offers its customers attractive service packages

such as “e-bonus”. The low-cost conversion to electronic payment transactions is

combined with a free payment transaction analysis which provides a detailed break-

down of the customer’s payment flows. Bank Austria provides business customers

with various services in cooperation with partners, such as software services by

Data Austria and Internet services by the Austrian Institute of Applied Tele-

communications. With a financing analysis, Bank Austria’s business customers can

take advantage of this expertise. This advisory instrument serves to optimise the

financing structure of small and medium-sized companies.


Target group marketing:

new focus on business customers

Advisory initiative in response to

elimination of anonymous savings

accounts

Common IT platform for Creditanstalt

and Bank Austria

Bank Austria offers young entrepreneurs support with setting up a new business.

A service package for “start-ups” is carefully tailored to deal with the issues involved in

the difficult move to self-employment. Nevertheless, some 22,000 persons in Austria

recently started a business of their own, and the trend is moving up. The desire to

provide professional assistance also gave birth to the electronic fiduciary register by

the Vienna Chamber of Attorneys, which the Bank Austria Group helped to set up.

Business customers will make major efforts in 2001 to prepare their systems for

the introduction of euro banknotes and coins. Bank Austria is supporting invest-

ments needed for the conversion to the euro by 31 December 2001 with a credit

initiative which provides a two per cent interest rate subsidy (for the purchase or

adaptation of cash registers, computer software, employee training, etc.).


With the addition of the Bank Austria Group and its subsidiary companies in CEE, the HVB Group serves some eight

million private customers. In the Private Customers and Professionals segment, the Bank of the Regions strategy is of

special significance: individual customers in particular demand advisory services which fully meet their cultural and social

expectations. In Austria, Bank Austria is pursuing this goal with a two-brand strategy, and in CEE countries via a

differentiated regional approach.

To reach its objective of securing long-term customer relationships, Bank Austria is taking a three-pronged approach:

firstly, the bank is fine-tuning its market segmentation in order to more closely align its services and areas of expertise

with customer needs. The all-round service provided to business customers, for both their business and private needs,

and the strong position in the youth and student market – a market with great future potential – are examples of our

strategy: providing customers with solutions to the issues they face at the various stages in their life, rather than simply

offering products. Secondly, Bank Austria is emphasising mobile and direct sales in its mix of sales channels. Particularly

with regard to self-service and e-banking, clear and uniform procedures which are not subject to process interruptions

go hand-in-hand with the ability to serve users with different needs. The massive investments which are required in this

area are made throughout the HVB Group, taking advantage of economies of scale. Thirdly, a range of high-quality yet

standardised products has not only advantages for banking operations, but also benefits customers: the value created

by customer advisers is focused on customer relationships and on advisory services.

47

In 2001, Bank Austria will focus on making online accounts available for young

people. Bank Austria has also made good progress among students, and in 2001

the product emphasis will increasingly shift toward accompanying students in the

period following their studies. 10.2% of all Bank Austria customers are between

the ages of 14 and 19, far above the industry average of 6.9%. This provides a

good starting position for maintaining and broadening a solid long-term customer

base.

Developments in branch-based sales

Including its branch office in the Riezlern customs area, at year-end 2000 Bank

Austria maintained some 291 sales units, and Creditanstalt 198. During the

reporting year, Bank Austria merged together six branch offices; through the

integration of Sparkasse Stockerau into Bank Austria, two business units were

added to the group. Since the merger between Zentralsparkasse and Länderbank

in 1991, the number of branch offices has declined by 117. Business ventures with

first-class non-banking partners on the premises of Bank Austria not only help to

reduce costs, but most importantly, help to increase customer frequency. The bank’s

branch office strategy, which strives to meet the specific needs of individual

locations, means that branch offices range from full-service to self-service branches.

Creditanstalt’s BankShops, which are located in shopping centres, have proved to

be very successful. In October 2000, Creditanstalt opened its fifth BankShop in the

city of St. Pölten.

Online banking

The strong demand for online banking continued in 2000. Bank Austria won

40,000 new online banking customers during the year, which represents a gain of

74% against the previous year. Of the 315,000 online accounts, 175,000 are

current accounts, almost 43,500 are PlusCards, 63,000 are VISA credit-card accounts

and 33,500 are securities accounts. Creditanstalt was also very successful with its

electronic banking services. 80,000 customers use CA-B@nking, which corresponds

to an increase of 127%. Both banks worked to promote electronic payment

transactions. More than 528,000 transfers were made using CA-B@nking during

the reporting year, and 67,000 CA-DiscountBroker orders were issued. Bank Austria

implemented 12,000 securities transactions via the Internet, for a volume of

1 53 m. With almost 2,000 hits per month on the bank’s WAP gateway, WAP

banking has also become an indispensable medium for banking services for many

customers.


Target group marketing:

the younger generation

Sales channel mix

VISA-SERVICE Kreditkarten AG

VISA-SERVICE Kreditkarten AG, a consolidated subsidiary of Bank Austria, achieved

total turnover of 1 2.64 bn in 2000, some 13.6% more than during the previous year.

There was significant growth of 16.1% in turnover with Austrian merchants, which

amounted to 1 1.6 bn. With over 800,000 VISA cardholders and more than 55,000

merchants who accept this credit card, VISA is the clear market leader in Austria.

In March 2000 VISA introduced its new business card programme: the VISA

Business Card, which is designed to meet the needs of self-employed persons and

smaller companies, and the VISA Corporate Card, which is suitable for larger

companies and multinational corporates. Via the “two-card system”, the VISA

Business Card provides an ideal separation between business and personal

expenses. The VISA Corporate Card offers exclusive CLW (Corporate Liability

Waiver) coverage, which protects companies against the abuse of company cards

by employees.

In the Grand Prix Customer Service Award, a competition for telephone-based

customer services, VISA took first place for the third successive time among the

banks and credit card companies that were tested in Austria. Moreover, for the first

time ever, VISA succeeded in 2000 in surpassing all other 105 companies tested,

in all industries, thereby emerging from the competition as the clear leader in

telephone-based customer services in Austria.

The international standard for secure credit card transactions in the Internet, SET

(Secure Electronic Transaction), is being further developed on an ongoing basis.

Some 10,000 VISA cardholders in Austria currently take advantage of the SET

standard for making secure payments via the Internet.

Diners Club Austria, which maintains close ties to Creditanstalt, was brought

together at the end of December with the activities of AUA-AirPlus and Lufthansa

AirPlus Österreich to form a joint venture, which is expected to expand opportunities

for using the card.

Lending business

With regard to financing activities, in 2000 the Bank Austria Group placed an

emphasis on building and residential living. At the end of February, the Group

launched an initiative in the form of a lending discount which served as a “house-

warming present” to customers. By the end of June this initiative had generated

new personal loans totalling 1 430 m. The advertising campaign was built around

the slogan “Careful: these apartments burn your rent!” and was designed to

appeal to the general desire among Austrians to own their own house or


VISA Corporate Card

VISA Business Card

SET: the security standard for

credit cards in the Internet

49

apartment. This successful lending initiative was then repeated in November and

December. At Creditanstalt as well, lending for residential housing also increased

by a disproportionate amount. Leasing offers were again used to complement the

financing business for automobiles.

In the retail banking sector, Bank Austria and Creditanstalt again both experienced

stronger demand for foreign-currency denominated loans, which accounted for

virtually all new loans. The bank advised customers regarding the associated risks

and rewards, and offers a number of innovative products for switching to another

currency during the period of the loan.

Savings products

Bank Austria achieved very gratifying rates of growth with its PlusCard savings

card. At year-end 2000, capital deposited on the 211,000 PlusCard accounts

amounted to some 1 719.4 m, an increase of 44%. Beginning in 2001, the

PlusCard has offered graduated rates of interest based on the account balance,

making the product even more attractive for customers. A similar card offered at

Creditanstalt, the ErfolgsCard, also experienced very positive growth: in only two

years it achieved a volume of 1 545 m.

With regard to building society savings plans, Bank Austria made referrals for

47,000 new contracts and thus achieved an increase of 12% relative to the

previous year. Creditanstalt’s cooperation with Wüstenrot was expanded to include

financing products offered by Creditanstalt, such as loans for the purchase of

automobiles.

Both Bank Austria and Creditanstalt are experiencing increasingly stronger

demand for securities-based investments. Particular mention should be made of the

lead products for retirement planning, “PensionsInvest” and “P.I.Free”, where the

volume invested more than doubled. The segment focusing on fund-linked life

insurance policies also experienced rapid growth, with the number of referrals

made by Bank Austria for new Master Life policies based on regular premiums

increasing more than fourfold as against the previous year, while new policies

based on one-off premiums doubled.

The results described above reflect the efforts made by Bank Austria in the

retirement planning segment.

Creditanstalt’s market-based “Securities Plan” was also successful. In addition to

mutual funds, customers can use the plan to invest in residential construction

bonds offering special tax incentives and in real estate via shares of CA-Immobilien-

Anlagen AG.


Focus on building and residential living

“Intelligent” savings cards

Retirement savings

Asset management

The mutual fund business continued its path of growth in 2000. The growing

interest of investors in high-yield investment opportunities and the increasing need

for private retirement planning are significant factors behind this development.

The overall volume of the mutual fund market in Austria stood at 1 84.5 bn at

year-end 2000. Thus the total amount of investments in mutual funds has moved

closer to the total invested in savings accounts. The total volume of mutual funds

managed by Capital Invest grew in the past year by some 5% from 1 15.1 bn to

1 15.8 bn. This corresponds to a market share of 18.7% as per year-end 2000.

At the beginning of March, Capital Invest launched “TopPharma”, the first in a

series of sectoral funds. This fund invests in the top global pharmaceuticals shares.

On account of strong investor interest, fund volume increased to some 1 135 m by

year-end 2000. The pharmaceuticals industry was also one of the few positive

exceptions to general share price developments in the reporting year. TopPharma

achieved capital growth of about 40% by year-end 2000.

Another new and innovative fund is “Select Dynamic Europe”, which invests in

shares of Europe’s “New Markets”, particularly high-growth, future-oriented

industries. This fund was launched very successfully on the market, and by

year-end 2000 volume had already amounted to 1 26.6 m, with a significant

number of units being placed outside Austria as well. The “New Markets” were

among the market segments hit hardest by general share price declines, and fund

management succeeded in shielding Select Dynamic Europe somewhat from the

negative market developments.


Most recent figures for 2000, preliminary data

Financial assets held by private households in Austria

Structure Year-on-year change since 1997

Mutual funds

Life insurance policies

Pension funds

Shares

Bonds

Bank deposits

Cash

0

20

40

60

80

100 3.7%

14.2%

14.4%

5.0%6.1%

52.7%

3.8%

5 267 bn

11%

27%

Total 5.9%

27%

32%

–15%

2%

0%

–15 –10 –5 0 5 10 15 20 25 30 35

Capital Invest offers attractive

sectoral and theme funds for the

Bank Austria Group

51

In spite of the sharp drop in investor interest in bond funds, the launch of

TrendInvest, a specialised bond fund, was a great success. Via an innovative bond

management strategy, TrendInvest hopes to achieve particularly high levels of

income during favourable market phases, and to avoid annual losses as much as

possible on falling markets by hedging as much as 100% of the fund. By year-end

2000, this fund had already achieved a volume of some 1 102 m.

In the second half of the year, Capital Invest continued its successful series of

sectoral fund issues. In September, the company launched Select Biotech and

Select TeleWorld. Select Biotech invests in the most attractive global biotechnology

shares. Biotechnology will have a particularly strong impact on human life in the

21st century. Companies which are active in this sector have a correspondingly

bright outlook for the future, and offer investors who are not risk-averse the

opportunity to make attractive long-term profits. During the subscription period in

September 2000, investors put some 1 43.6 m into the fund. Select Biotech was

also affected by the general share price declines, but its performance nonetheless

was substantially higher than the market. Despite the price declines, the volume

increased to some 1 46.8 m by year-end. Select TeleWorld invests in the most

important shares in the telecommunications industry, telecom equipment

providers, media and consumer electronics. These sectors have a very good

long-term profit potential, with a correspondingly high level of volatility.

The most recent launch in Capital Invest’s successful sectoral fund series is

“Capital Invest Select Internet”, which was issued at the beginning of December

2000. At the time of the launch, the downturn in Internet shares had already

largely taken its course. Nonetheless, the fund met with great interest from

investors. Investors who are not risk-averse can profit from the enormous long-term

potential offered by shares in this innovative, future-oriented industry. Following

the most recent market corrections, this sector is poised for a successful year in

2001.

In addition to sectoral funds, which are primarily designed to provide experienced

investors with interesting opportunities to diversify their portfolios, the other funds

managed by Capital Invest grew strongly despite the difficult investment backdrop

in 2000. Particularly popular on the market are funds custom-tailored for private

pension planning, despite all the turbulence on the capital markets. Experience

shows that in the area of pension planning, which generally involves a long invest-

ment horizon, short-term price fluctuations are of only secondary importance.


Inter-national 3 6.8 bn

CapitalInvest 3 15.8 bn

RingturmKAG 3 2.5 bn

AMG 3 3.2 bn

Assets under management 3 28.3 bn (31 Dec. 2000)

In 2000, the market again reacted very favourably to Capital Invest’s Internet

presence for publicly-traded funds. During the reporting year, preparations were

made for a complete overhaul of the company’s website. At the end of January

2001, Capital Invest’s website was given a completely new look, ensuring a more

transparent layout, better navigation and attractive new content. The Customer

Support Center (CSC) makes it possible for major investors to view, in the greatest

possible detail (fund composition, transactions affecting fund assets, performance,

etc.), their specialised funds via the Internet; this feature is password protected.

With a market share of 24% among major investors and institutional customers,

Capital Invest holds a particularly strong position on the market.

Capital Invest’s international activities focus on the countries of Central and

Eastern Europe. Depending on local investment regulations, the Bank Austria Group

is pursuing the strategy of adding international mutual funds to the range of invest-

ment products at the earliest possible opportunity. The local subsidiary banks of the

Bank Austria Group and the business units of CA IB market the funds, with Capital

Invest in Vienna operating as supplier and manager of the fund products. For the

past three years investors in the Czech Republic have been able to choose from a

broad range of mutual funds with international portfolios. Since the autumn of

2000 investors in Slovakia have also had access to these funds. In Hungary and

Poland, particularly popular products were successfully introduced to complement

the existing range of funds offered in local currencies. Croatia will soon follow.

With the introduction of mutual fund activities which meet international

standards, the Bank Austria Group has ensured itself a good starting position in the

race for market leadership in Central and Eastern Europe also in the promising asset

management business.

Asset Management GmbH (AMG), the Bank Austria Group’s asset management

company, experienced rapid growth in 2000. In a highly competitive environment,

subject to extremely difficult market conditions, the company proved its innovative

strength: asset volume managed by AMG amounted to 1 3.2 bn at year-end 2000,

an increase of 16.4% as against the previous year.

The Master Fonds, Bank Austria’s funds of funds managed by AMG, also made

very gratifying progress. Despite the negative developments on international

exchanges in 2000, the total volume of the funds of funds increased by 133.7% to

1 835.7 m. Particular mention should be made of the launch of “Master Fonds

Innovativ” in February of the reporting year. This fund invests in selected equity

funds which focus exclusively on growth stocks. At year-end 2000, fund volume

already amounted to 1 63 m.


Capital Invest’s new Internet presence

Activities in CEE countries depend on

local investment regulations

Asset Management GmbH

Funds of funds and hybrid products

53

There were also gratifying rates of growth in the area of individualised asset

management services for private and institutional customers. Products backed by

capital guarantees were very well received by the market. On account of market

volatility, an increasing number of customers are coming to appreciate investment

forms which, in addition to offering the chance to earn a profit, also guarantee the

invested capital. The three capital guarantee products issued in 2000 by Bank Austria

and managed by AMG were placed very successfully on the market. In addition,

management again succeeded in significantly outperforming the market with the

speculative element of the capital guarantee, BIA Options & Futures Funds (2000

performance: – 0.8%; 1999: +58.1%; 1998: +35.9%; 1997: +40.6%).

Private banking

BANKPRIVAT AG, formed as a Group unit of Bank Austria and Creditanstalt,

commenced business operations on 2 May 2000 as a wholly-owned Creditanstalt

subsidiary. The bank commenced operations with 1 2.9 bn in assets under manage-

ment for customers, and was thus the largest private banking unit in Austria from

the very start. In the eight remaining months of the calendar year, the assets

managed by the bank increased by 14%, and income was boosted by 25%. With

the spin-off of Bank Austria’s and Creditanstalt’s private banking activities to

BANKPRIVAT, the Bank Austria Group created a competence centre to advise and

win the most demanding private banking customers with substantial personal

assets. By combining the expertise of both banks in a single unit, both the quality

and efficiency of individual advisory services and problem-solving were further

improved and optimum use was made of potential synergies.

In addition to its own clientele, BANKPRIVAT supports branch offices and units in

Austria and abroad to advise high net worth individuals and win them as customers.

The cooperation with international units (BANKPRIVAT desks) is being strengthened

for the purpose of unlocking the great potential of Central and Eastern Europe for

private banking services. A representative office is planned to be opened in Abu

Dhabi in 2001.


Discretionary asset management and

structured products

Competence centre for private banking

customers

Key figures –Domestic Corporate Customers

1 m 2000 1999 Change in %


Losses on loans and advances – 287 – 197 46 %



General administrative expenses – 513 – 510 1 %

Result of other operating activities 23 10 >100 %

Net income before taxes 107 71 51 %


Risk-weighted assets (average) 35,058 29,819 18 %

Equity (average) 1,483 1,418 5 %




Large companies 85%

Bank Austria Group asmain bank of account

Small and medium- sized businesses 49%

Studies undertaken by market research institutes confirm the leading position

taken by the Bank Austria Group in the corporate customer segment. The two-

brand strategy again proved to be a successful instrument for this business segment

in the year under review. Surveys confirm the high acceptance of the “Bank Austria”

and “Creditanstalt” brand names in the market. At year-end the two banks served

about 38,000 companies. This gives the Bank Austria Group a market share of

26%. Its customers include almost 50% of all Austrian medium-sized enterprises.

In the case of large companies the figure is as high as 85%. Three-quarters of all

large companies have chosen the Bank Austria Group as their main bank of

account, and for two-thirds of them the Bank Austria Group is their preferred

bank with which they maintain very intensive business relations. The Bank Austria

Group in particular has a disproportionately large customer share in the areas of

treasury products, documentary credit business, export finance, foreign currency

transactions and foreign payment transactions.

The Group’s position in the market and product competency in the advisory-

intensive areas with a high value added is also reflected positively in the income

statement. 2000 was a very good year for the domestic corporate customers

segment in absolute terms. The achievements of this business segment are however

particularly impressive when seen against the background of the highly-contested

Austrian market. Net interest income increased significantly (+20%) in 2000 despite

continued pressure on margins resulting from price competition from the non-

private sector and from the upward trend in interest rates experienced in the first

few months of the year. Net fee and commission income also rose strongly (+6%),

and the net trading result matched the level of the previous year. While economic

growth helped to significantly boost business volume particularly in the first half of

the year, general developments in regard to risk in the latter half of the year

required the bank to make substantially higher provisions for loan losses.

Costs were kept under control in 2000: with general administrative expenses

held at a stable level (+ 1%), the cost/income ratio was cut to under 60%. Overall,

net income before taxes rose by one half. The return on equity improved from 5.0%

to 7.2%, but continued to reflect the market situation in Austria. International

levels will be gradually approached with the advance of capital market instruments

which are sufficiently flexible for companies. The Bank Austria Group is very well

positioned to respond to these needs.

In 2000 the Bank Austria Group revised the structures, procedures and

responsibilities in the corporate customer business and defined a new approach,

which enabled it to reduce costs and significantly enhance earnings. These

Domestic Corporate Customers

54 Domestic Corporate Customers

55

measures focused on positioning both banks’ central units for corporate customer

management, product development and settlement as a Group function. The sales

networks of Bank Austria and Creditanstalt will remain separate pursuant to the

successful two-brand strategy, and will continue to operate independently on the

market. Both banks have in each case reduced the number of regional offices

serving corporate customers to seven. At a regional level this step will be followed

by further steps to integrate back-office functions. These measures will result in

much leaner structures, fewer hierarchies and more efficient procedures, which will

in turn enable the bank to improve the quality of its customer services.

The strategy implemented by Bank Austria AG in 1999 of offering corporate

customers “services under one roof”, whilst also defining clear lines of responsibility

within the bank for specific customer groups and results, proved to be successful.

A further innovative step was taken in the area of relationship management in

the year under review. This mainly involves recognising customer needs quickly and

accurately, tailoring high-quality services to meet all these needs, and ensuring

maximum flexibility on the part of the customer adviser. The partnership with the

customer which is a result of the Clienting® philosophy was very well received by

companies in the test regions, and it is a concept which will now be introduced

throughout Austria.

In the first half of 2000 Bank Austria gave greater priority to the marketing

of treasury and special financing products, such as export and EU financings

and venture capital, particularly in the segment of medium-sized enterprises.

In view of the increasingly stronger trend toward alternative forms of financing,

Bank Austria AG will in future concentrate more on private equity financing. The

two existing equity funds (Gründerfonds and UBF Mittelstandsfinanzierungs AG)

will be supplemented by additional new equity finance companies. In the year

under review Bank Austria AG sold its holding in Bank Austria TFV High-Tech-

Unternehmens Beteiligung GmbH (BA-TFV) to 3i Group plc, a British fund

management company.

In the autumn of 2000 marketing activities for corporate customers focused on

capital formation at a corporate level. The autumn initiative mainly involved

pointing out the advantages of pension plans using pension funds to ensure

adequate capital coverage for employees’ claims, and drawing attention to the

opportunities offered by investments in attractive mutual funds. Through

professional event-marketing initiatives and events organised in different regions of

the country we increased customer awareness of this topic and strengthened

relations with our customers.


Two-brand strategy reinforced by

integration of back-office functions

From sales-based thinking to

a partnership with the customer

Focus of marketing activities:

special financings, venture capital,

private equity

Company pension schemes based on

capital coverage

The integration of experts from the Bank Austria and Creditanstalt customer

service units for electronic banking and financial management within a single

subsidiary company, Data Austria, in the Group exceeded expectations for the

planned realisation of synergies already in the first year. The concentrated expertise

of both banks and the resulting quality further strengthened the Bank Austria

Group’s leading role in e-banking.

This is also reflected in the above-average capacity utilisation of the Group’s elec-

tronic banking and financial management sales facilities. The 7,200 contacts with

customers established and maintained via the old structures have increased to

9,000 today. This represents a 25% increase in the number of customers taking

advantage of the advisory services in this area, a development which was

accompanied by a 30% decline in costs using the new structure. The customer

hotline shortened the response time still further. In the year under review 75% of

the queries from customers were accepted within 20 seconds, which is a significant

improvement over the 39% recorded for the previous year.

International Cash Management, a product department created in 2000,

enabled the bank to win new customers in particular for its Europooling business.

Bank Austria developed Margin Pooling, a new product for its Central and Eastern

Europe core market, and successfully established the product in the market. Margin

Pooling makes it possible for all account relationships within the Bank Austria

Group to be included in a cash management model. A big advantage is that local

accounts can also be integrated in the system in the respective local currencies.


Companies, last status 1999

Financing of Austrian companies

Structure

Year-on-year change

since 1995, in %

Equities

Other securities

Loans

Other

0

20

40

60

80

100

21%

7%

68%

4%

5 213 bn

13.9%

Total 8.6%

17.8%

6.6%

7.7%

0 5 10 15 20

Electronic banking and financial

management

Cash management:

“Europooling”, “Margin Pooling”

57

With the BusinessLine, BusinessCash and BusinessPlanner products, Bank Austria

offers corporate customers a comprehensive range of instruments for modern

financial management. The new cash management software “Business Cash” is an

ideal tool for professional liquidity management complementing “BusinessLine”.

The range of products for corporate customers is completed with seminars on the

topics of electronic banking, financial management and the euro.

In its lendings to public borrowers the bank’s efforts were targeted at

improving terms and conditions. This policy was implemented without a loss of

market share in the municipal sector. Financings for the federal government

declined according to plan by about 1 145 m through repayments and the expiry

of loan agreements.

In 2000 the volume of international financings more than doubled from 1 456 m

to 1 1,071 m. The bank was particularly successful in Switzerland, where business

volume totalled 1 806.2 m. Regional authorities (cantons and municipalities)

account for two-thirds of this volume, and companies closely associated with the

public sector for one-third. Business in Spain and France also developed very

favourably. Financing was made available to both countries for transport-related

projects, motorway projects in Spain and local urban services. Examples are the

participation in the financing for the underground railway system in Bilbao or the

financing of a tramway project in Caen.


The bank has always attached great importance to offering customers, especially large companies and multinational

corporates, “services under one roof”. The concept of Integrated Corporate Finance reflects efforts to establish a basis

for close cooperation between long-term relationship banking and transaction-oriented investment banking. This

consideration is based on the fact that major medium-sized companies, one of our principal target groups, are also

beginning to use capital market instruments. This means that capital market products are gaining ground as instruments

used throughout a company’s life cycle, for both investment and financing. This is an area characterised both by

increasing customer demand and a particularly high potential for adding value, especially through the use of products

that reduce equity capital requirements. And we can make particularly effective use of our portal function to give access

to the global financial market.

Multinational corporates, export and project f inance

In 1999, the Bank Austria Group introduced relationship management as a Group

function for large companies operating on an international scale. Given their multi-

tiered organisational structure and complex international business relations, these

companies have an enormous demand for individualised advice and problem-solving

competence. Accompanying these customers in their strategic expansion and foreign

investment projects is a task that we see as being particularly important. Examples are

Wienerberger with its acquisition of Cherokee Sanford/USA or the financing of various

investment projects of OMV UK Ltd. Special mention should be made of the substan-

tial participation in financing the acquisition of Assi Domän’s packaging operations by

the Frantschach Group. Bank Austria acted as a major lender within the consortium.

Besides providing support to major Austrian companies, we played a significant

role in helping foreign groups of companies which belong to our customer base to

make international acquisitions. Important transactions included the acquisition of

a US company by Numico NV, in which we acted as co-arranger, and the acquisition

of Rugby by RMC Plc.

In 2000, the bank’s comprehensive programmes with international companies for

the purchase of accounts receivable again proved to be a particularly attractive

instrument to improve the balance sheet and boost the performance indicators of

these customers. In December 2000 Bank Austria was the first Austrian bank to

conclude an ABS programme in cooperation with State Street Bank.

The Bank Austria Group maintained its clear leadership position in the area of

export finance. Besides the traditional countries like Turkey, Iran, and China, the


Manufacturing, raw materials 41.6%

Telecoms, transport 24.3%

Real estate 11.6%

Energy,infrastructure 22.5%

CzechRepublic 17.1% Croatia 9.9%

Slovakia 8.0%

Slovenia 3.1%Romania 3.3%Other countries 0.5%

Poland 39.3%

Hungary 18.9%

International project f inanceBreakdown of portfolio as at 30 September 2000

by sector (all regions) Countries in CEE

Assisting multinational corporates

in their strategic expansion

regional focus in the 2000 business year was on the African region (especially

Algeria, Ghana and Gabon), Brazil and the Philippines. Bank Austria and Credit-

anstalt provided Austrian exporters with comprehensive support for their worldwide

transactions, and facilitated many export transactions by including them in existing

global credit agreements where cover is provided by Oesterreichische Kontrollbank.

This applies in particular to export transactions with China, Iran and Algeria. Multi-

sourcing projects, which are export transactions within the framework of major

projects, made an important contribution to the Bank Austria Group’s strong market

position. Bank Austria makes it possible for these projects to be realised by assigning

the risk to a number of different export credit insurance agencies. In this connection

the private insurance market is also playing an increasingly important role. Using

sophisticated financing and risk insurance structures, we carried out, for example,

transactions in Turkey with the assistance of a private insurer and by applying a

parallel insurance structure with OeKB and US Exim, and an Iran-related transaction

using a reinsurance structure with SACE, an Italian credit insurance agency.

Cooperation with the Group subsidiaries in the core market comprising Central

and Eastern Europe will be further strengthened. The Bank Austria Group is success-

fully working with state-run export insurance agencies in Eastern Europe, such as

EGAP, the export insurance agency in the Czech Republic.

In the project finance field, activities in 2000 remained focused on traditional

sectors such as energy, telecommunications, and selected branches of the manu-

facturing industry. In the core market of Central and Eastern Europe, the Bank Austria

Group holds an extremely strong position: it is the EBRD’s number one co-financing

partner, and is among the ten largest arrangers of project finance. In spring 2000 the

Bank Austria Group received the “Best Project Finance House” award for the CEE region.

The dynamic growth experienced in 2000 was due on the one hand to the

growing need of Austrian customers for assistance with their internationalisation

projects, and on the other to the ongoing liberalisation in the markets of Central

and Eastern Europe, particularly in the energy and telecommunications sectors. The

combination of recognised product expertise in Vienna together with an efficient

network of local offices has proved to be a particular strength. Special mention

should be made of the mandates awarded in 2000 to finance two power plants, the

acquisition of a European competitor by an Austrian customer in the consumer

goods industry, as well as the role of lead arranger in a forint-denominated project

financing for the local subsidiary of the world’s largest mobile phone operator. Bank

Austria acted either as arranger or co-arranger for ten transactions. For a number

of transactions, the local currency content was a decisive factor.

59Domestic Corporate Customers

Export financing benefits from

multi-sourcing advantages of an

international banking group

Project finance: focusing on growth

sectors and growth regions

Export and investment f inance

Financings provided to exporters totalled almost 1 5 bn by year-end 2000, and

were thus some 15% higher than at the end of the previous year.

In addition to success in winning new customers, the structuring of large volume

financings in connection with substantial internationalisation projects by Austrian

companies in North America, Scandinavia and several countries of Central Europe

contributed greatly to the very positive developments.

Programmes for the purchase of accounts receivable met with an exceptionally

favourable response from customers. These programmes are designed by the

experts at Bank Austria to meet customers’ individual needs. Demand for invest-

ment finance was also strong. On account of the complex nature of individual

assistance schemes, the selection of a suitable instrument is of decisive importance.

In the past year, the Bank Austria Group successfully assisted customers with

numerous investment projects.

Investment projects for small and medium-sized companies as well as infrastructure

projects for the public sector and for other parties handled by Bank Austria through

the EIB global loan facility grew on average by 20% as against the same period in

the previous year. Lending volume almost doubled. Thus Bank Austria is by far the

largest partner of EIB in Austria. Thanks to the European Investment Fund’s (EIF)

50% deficiency guarantee pursuant to the Growth & Environment (G&E) programme,

it was possible to boost the lending volume of environmental loans to corporate

and business customers by about 25% (see Ecology, page 106).

Financial institutions, documentary business and bil ls

of exchange

The Bank Austria Group maintains contacts with over 5,000 correspondent

banks and has some 3,000 account relationships. Cooperation with partner banks

in the Middle East and Asia with regard to documentary credits and collection

transactions was particularly successful. This region still generates the highest

income and turnover in the documentary business. Bank Austria further expanded

its market share in this region in 2000. In our core market of Central and Eastern

Europe, we supported our customers’ business activities not only via our own

banking subsidiaries, but also via an extensive correspondent banking network.

Bank Austria signed a cooperation agreement with the EBRD in London which

simplifies trade with the CEE countries and thus provided a strong impetus to the

documentary credits business.


Growing internationalisation of

Austrian companies supported by

structured finance

EU financings for small and

medium-sized companies and for

infrastructure projects

Documentary business in CEE

countries via an extensive network

of banking subsidiaries and

correspondent banks

Disproportionately high rates of growth were achieved in the commercial

guarantee business. In the area of foreign guarantees alone, turnover increased by

29%, and the number of transactions by 11%. The outstanding guarantee volume

at year end amounted to some 1 5.8 bn. This is due to the bank’s participation in

almost all of the large transactions in the construction, real estate and tele-

communications sectors. The Bank Austria Group played a lead role with regard to

bid bonds for the auction of UMTS licences in Austria, and for a major road-

building project in Poland.

During the past year, Bank Austria achieved further growth in the bills of exchange

business. The volume of discounted bills of exchange amounted to 1 596 m

(27,000 transactions).

Leasing business

Following the merger in 1999, Bank Austria Creditanstalt Leasing was exceptionally

successful in the period under review. With new business volume totalling just under

1 1.7 bn, the company again surpassed the record results generated by the two

predecessor companies in 1999. The company was thus able to further expand its

market leadership in Austria and abroad, and has shown itself to be Austria’s most

innovative company in the leasing business. In addition to the contribution made

by foreign business units, real-estate financings also contributed to extremely

positive business developments, with new business reaching a record volume of

1 402 m. This represents growth of 28% compared with the previous year.

The rapid pace of business growth at the subsidiary companies in the Czech

Republic, in Slovakia, Poland, Hungary, Slovenia, Croatia, Germany, Italy and

Argentina, and activities at the representative office in Romania, give BA/CA-

Leasing a leading position among Austrian leasing companies, particularly in

Central and Eastern Europe. In 2000, with just under 500 employees, leasing

transactions abroad achieved a record volume of more than 1 897 m.

The structured leasing finance segment also experienced dynamic growth.

Business activities focused on the arrangement of complex cross-border leasing

transactions for large Austrian and Western European customers, and on aircraft

financing for regional airlines in Europe. In the area of equipment and motor

vehicle leasing, the company was able to match the excellent results achieved in the

previous year, with the volume of new business amounting to some 1 391 m.

With the further development of BA/CA-Leasing’s Internet platform in 2001, the

company plans to systematically expand its distribution channels via the Internet

while maintaining a high level of advisory expertise.

61Domestic Corporate Customers

Strong growth in guarantee business

In 2000 and early 2001, Bank Austria’s international business was completely re-

oriented and focused. The International Business segment has its roots in the inter-

national network built by Creditanstalt and Bank Austria in the 1960s and 1970s to

complement corporate banking activities. The international branches and subsidiaries

were merged as part of the integration of Bank Austria and Creditanstalt in 1998.

The Bank Austria Group, Austria’s leading international bank, has actively supported

Austria’s export industry for a long time through a worldwide presence – including

operating units located in the Far East, in Latin America, North America, Western

Europe and in the CEE countries as well as in the international financial centres of

New York, London and Singapore.

During the past decade the commitment to the CEE countries rapidly became a

strategic mission that was given top priority. In 1990, immediately after the markets

were opened up, Creditanstalt and Bank Austria entered individual countries on a

case-by-case basis, based on prevailing legal and economic conditions, and estab-

lished a foothold there. When the initial transformation crisis was overcome in the

mid-1990s, this pragmatic approach was followed by targeted development. With

the harmonisation of the regulatory framework, and ahead of EU membership which

International Business focused on CEE

64 International Business

The regions of the Bank Austria Group

Country group 1

Country group 2

Country group 3

Baltic states served by Vereins- und Westbank

Russia servedby HypoVereinsbank

Poland 343 235

OfficesBA/CA HVB

Czech Republic 17 18

Slovakia 6 4

Slovenia 4 –

Croatia 5 1

Hungary 25 19

Romania 2 –

Ukraine 1 –

Bulgaria – 4

Bank Austria Group – traditionally

Austria’s leading international bank

Early mover advantage in

Central and Eastern Europe

as at February 2001

65

most CEE countries are seeking, an increasing number of other international banking

groups became active in this region, mainly through acquisitions. Thus competition

has intensified.

In this environment, the early commitment to the emerging markets in Central

and Eastern Europe is proving valuable today. Bank Austria did not jump on the

bandwagon when it was already moving. Starting with a handful of employees in

Budapest ten years ago, the Group has developed into the largest international

bank in this region, with an extensive network built mostly through organic growth.

While regional differences exist in terms of market size, international integration

and level of financial intermediation, the CEE countries are poised for economic

growth, which will be accelerated by the processes initiated to attain EU member-

ship. Therefore in spring 2000, Bank Austria launched an initiative defining its core

market as Central and Eastern Europe or, more precisely, Austria and CEE. In Poland,

the largest CEE country, Bank Austria acquired a majority interest in Powszechny

Bank Kredytowy S.A. (PBK), Warsaw, and merged its local subsidiary with this bank.

In view of this significant move and the more dynamic pace of market penetration

in CEE, the indirect approach of a holding company for CEE operations proved to

be no longer appropriate for taking full advantage of the enormous potential. For

this reason Bank Austria Creditanstalt International was integrated into Bank Austria

in November 2000 and reorganised as a separate division with a matrix organisation

combining regional and divisional responsibilities.

The integration with HypoVereinsbank enables Bank Austria to move ahead much

faster in the CEE countries, propelled by the strength of Europe’s third largest bank.

At the same time it can give its customers access to a stronger geographical pres-

ence and the status of a large bank in the other regions, too, including the advan-

tage of network banking in the EU market. Tasks within the HVB Group were

divided on the basis of comparative advantages. Given its excellent starting position,

Bank Austria will be responsible for the business development of the HVB Group in

the CEE market, where it will combine its units with those of HVB in line with the

“Bank of the Regions” concept. Global operations outside CEE will be directed by

HVB and the Bank Austria units will be integrated into HVB together with their exist-

ing business and staff base. This means that contacts for our corporate customers

will remain largely the same, while the range and weight of the international net-

work will increase. We started work on the integration project immediately after

approval had been given by the European Commission. With the exception of

Poland, the mergers will be completed by September 2001.

International Business

Numerous awards confirm

outstanding position in

CEE countries:

Global Finance:“best international bank in Central

and Eastern Europe”

Euromoney:“best international bank in Central

and Eastern Europe”

The Banker:“bank of the year 2000”

Central European:“best bank in Hungary over the last decade”

Responsible for the CEE growth market

within the HVB Group

Continued presence with combined

strength in the global markets for our

customers

Just under 20,000 employees at the enlarged units will serve 2.5 million custom-

ers in about 700 branches. Based on the new structure, the HVB Group currently

maintains a presence in twelve CEE countries: Bulgaria, Croatia, the Czech

Republic, Hungary, Latvia, Lithuania, Poland, Romania, Russia, Slovakia, Slovenia

and Ukraine. A representative office in Yugoslavia will be opened in the first half of

2001. In many countries the Group holds a top position, with market share

between 5% and 10%.

Responding to local cultural and economic differences is the main idea behind

the Bank of the Regions concept. Decentralised customer units are based on supra-

regional structures which ensure a rapid and suitable transfer of expertise, the

implementation of the HVB Group’s performance standards and, last but not least,

the establishment of a professional organisational and IT platform. The chosen

organisational structure (see Organisation Chart on pages 8/9) provides a suitable

framework for this interlocking of regional and divisional aspects. In response to

differences in the starting position, the business policy approach is differentiated

according to three regions (see map on page 64): universal bank as Poland’s third

largest bank (region 1); focused market development in the growth segments in the

countries of region 2: Czech Republic, Hungary, Slovakia; ambitious niche policy in

Bulgaria, Croatia, Romania and Slovenia. Business is planned to be further expanded

through organic growth or selective acquisitions.


Spread: high-yield bonds versus US 10-yr Treasury bonds

World stock market

Source: Thomson Financial Datastream Index

Stock market and credit spreads

Index Q1 98 = 100 % points

80

1998 1999 2000

90

100

110

120

130

140

150

160

100

200

300

400

500

600

700

800

900

Completing European integration,

using business potential

Based on the Bank of the Regions

principle, pursuing a differentiated

strategy: local customer service on a

joint platform

67

Business development in 2000

The International Business segment comprises a broad range of operations: com-

mercial banking branches and subsidiaries, including the CEE banking subsidiaries,

and the international business of Bank Austria Creditanstalt Leasing but excluding

the treasury branches, which are part of the Financial Markets segment. Also

included are the international finance and emerging markets investments units.

As CA IB Investmentbank has an international business focus, its Austria-related

capital market activities were reported as part of the International Business segment

until 2000.

This variety of operations was the reason why business results in this segment

for 2000 were exposed to widely differing influences from the operating environ-

ment, both in terms of geography and markets. Commercial banking activities

benefited from satisfactory economic trends in Europe and from the convergence

process in the CEE countries. After difficult years, the operating units in Asia re-

sumed the trends experienced before the emerging markets crisis erupted. Results

were very satisfactory. In South America, on the basis of the specific business ori-

entation, operations remained very profitable in 2000 despite a partially difficult

environment.

Negative factors in 2000 were the sharp decline of growth stock markets; the

slump in New Economy stocks in the US accompanied by a tighter interest rate

policy; and a dramatic deterioration in the credit standing of numerous – definitely

innovative and promising – non-mainstream companies. The gap between stock

market performance and credit spreads as an indicator of creditworthiness

widened, especially in the fourth quarter, to reach an extent last seen during

the crisis in 1998. This development also affected the primary market climate in

Western Europe and Austria.

As the year progressed, the direct impact of capital market conditions on credit

quality required additional loan loss provisions to be made for the US exposure.

Thus the provisioning charge rose by almost one half. In combination with weaker

net interest income – also an effect of US market conditions – this led to a signifi-

cant decline in net income. With the business policy reorientation initiated at the

beginning of 2000 and the provisions made, the US exposure has been finally

adjusted. Following two reductions of key interest rates in the US in the first few

months of 2001, the situation has eased (see chart on the left page).


Key figures – International Business

1 m 2000 1999 Changein %

Net interest income 488 533 – 8 %

Losses on loans and advances – 152 – 104 46 %




Result of other operating activities – 6 10 n.a.

Net income before taxes 108 249 –57 %



Equity (average) 1,260 1,257 0 %




Business development in the CEE countries

The CEE subsidiaries of Bank Austria were very successful in 2000. Net income

before taxes rose by 39% to 1 138.2 m. Major contributions to this increase came

from net interest income (+13%) and the lower risk provisioning charge. CEE busi-

ness accounts for only 1% of Bank Austria’s total loan loss provisions. The net trading

result significantly improved, too (+46%), largely offsetting the decline in net fee

and commission income. More than one-fifth of Group net income before taxes

comes from CEE business, to which 14% of equity has been allocated. The return

on equity was again significantly above 20% in 2000.

In the retail banking sector our banking subsidiaries serve more than 1.5 million

private customers and self-employed persons. They can use about 400 branch

offices in Central and Eastern Europe, and – since September last year, starting in

Slovakia – Internet banking as an additional distribution channel. Supported by a

mobile sales force – also newly introduced – mortgage and credit card business rose

strongly. With this expanded service the Bank Austria Group is again moving in the

forefront of developments. Cooperation arrangements with insurance companies

and the automotive industry were further expanded.

For 2001, in addition to the combination of HVB units with those of Bank Austria,

the following items will be high on the agenda: winning new customers with a

focus on selected business customers and private investors; consistently building

e-banking facilities and call centres in additional countries; selectively expanding the

branch network; and boosting real estate and card business.

In business with companies, the banking subsidiaries achieved sustained growth

among the target groups comprising international and local corporates in the year

2000. On this basis our Group further expanded its leading position in this impor-

tant market segment despite intense competitive pressure. Efforts to win new cus-

tomers were extended to the mid-market segment in 2000. On the products side,

the main emphasis is on short-term financings, capital investment financings, inter-

national export and trade financing as well as project financing.

In 2001, efforts will concentrate on further developing cash management and

electronic banking services. Another focus will be on providing product packages

targeted at medium-sized businesses. In the future, through the combined compe-

tence of units of HVB and Bank Austria in Central and Eastern Europe, we will offer

an even broader range of products based on the high service quality delivered by

young, highly motivated teams.


Key figures –


1 m 2000 1999 Changein %


Losses on loans and advances – 5 – 13 – 65 %

Net fee and commission income 42 58 – 28 %

Net trading result 41 28 46 %


Result of other operating activities 11 – 1 n. a.

Net income before taxes 138 100 39 %


Risk-weightedassets (average) 3,206 3,550 – 10 %

Equity (average) 642 474 35 %


ROE before taxes 21.2% 20.7%

69

Individual CEE banking subsidiaries in 2000

The Bank Austria Group took a majority interest in Powszechny Bank Kredyto-

wy S. A., Warsaw (PBK) in the year 2000. At the end of July, PBK shares represent-

ing a 10.29% interest were acquired from the Polish Treasury Department. Together

with the legal merger of PBK and Bank Austria Creditanstalt Poland S.A., which

became effective on 31 October, the Group’s equity interest rose to about 57%. The

merged unit is the third largest bank in Poland. The switch to a modern integrated

IT system proceeded as planned and will probably be completed in the first half of

2001. PBK’s results matched the satisfactory level achieved in 1999 although expen-

ses rose primarily on account of the implementation of the new computer system.

The year 2001 will see the integration of PBK and Bank Przemyslowo-Handlowy

S.A., Kraków (BPH), a subsidiary of HypoVereinsbank. Together the banks operate a

network of almost 600 offices and they have a joint market share of more than

10% in the large Polish market.

Bank Austria Creditanstalt Czech Republic a.s. had a very good year. Despite

heavy investment in three strategic projects (credit cards, mortgage business and

mid-market), the bank’s performance was well above budget. As economic condi-

tions improved, the volume of lendings to companies rose strongly. The strategic

orientation in the corporate banking sector was widened to include medium-sized

businesses while strict risk criteria continue to be applied. The activities of the Trea-

sury Customer Desk, which offers numerous special products for corporate cus-

tomers, was further expanded. Retail banking operations produced the best results

since the establishment of the bank in the Czech Republic. Sales of mutual funds

developed very well. The bank also started to offer its customers asset management

services; business in this area is growing rapidly. At present the bank has some

24,000 retail customers, one-third of whom became customers in the reporting

year. Two small branches were added to the network, bringing the total number of

the bank’s offices to 17.

Bank Austria Creditanstalt Slovakia a.s. was particularly successful in 2000.

The bank pursued a cautious credit risk policy; nevertheless, the volume of its loans

to customers rose by about 20%. Customer deposits developed favourably. The

representative office in Banská Bystrica was upgraded to a branch, the sixth branch

office in Slovakia. In the year under review the bank widened the range of retail

banking products. Internet banking was successfully introduced in autumn, and

international mutual funds have been offered in cooperation with Capital Invest

since October 2000. Bank Austria Creditanstalt Slovakia recently obtained a mort-

gage banking licence enabling it to offer mortgage loans to its customers from

spring 2001.


Czech Republic

BA/CA 78.6% HVB 100%

Established 1991 1992

Staff 942 460

Offices 17 18

Branch network covering all major business cen-

tres in the Czech Republic, serving corporate and

retail customers. Third-largest international bank.

20% interest held by Banca Intesa, 1.4% by

Simest

Slovakia

BA/CA 100% HVB 100%


Staff 221 120

Offices 6 4

One of the most dynamic and profitable banks.

A presence in all of the country’s major business

regions is planned to be established in the

medium term

Poland

PBK 57% BPH 86%


Staff 8,050 6,441

Offices 343 235

The two banks have a combined market share of

over 10%, i.e. the third-largest market position in

Poland. The extensive network provides customers

with the services of a universal bank

In its tenth business year, Bank Austria Creditanstalt Hungary Rt. further

expanded its market share in almost all business segments. The bank achieved its

best results ever, with net income after taxes up by about 40% on the previous

year. Its special role in the banking market was recognised by various business

magazines: for example, Euromoney awarded Bank Austria Creditanstalt Hungary

“best bank in Hungary over the last decade”, and Central European named it “best

foreign bank in Hungary”. The bank’s country-wide presence through 25 offices is

an essential success factor. Bank Austria Creditanstalt Hungary is among the lead-

ing banks for corporate customers in Hungary, with a market share of 8%. Deposits

from corporate customers rose by 28%, loans to companies increased by 18%.

Thanks to its efficient systems, the bank holds a top position in the commercial

domestic payments sector, where its market share is 10%. The favourable trend

seen in retail banking in the previous year intensified. 50,000 retail customers can

now choose from a complete range of products. The volume of personal loans

almost doubled. Although the savings ratio declined, retail deposits entrusted to

the bank rose by 20%. Intensive cross-selling efforts brought the number of bank

cards to about 30,000, an increase of more than 50%. Treasury operations pro-

duced outstanding results. As the bank took over the custody business of Budapest

Bank, it became a market leader in this sector, too. The bank’s custody portfolio

now totals US$ 3.7 bn.


Financial intermediation and stock market capital isation / CEE

Total assets in % of GDP Stock market capitalisation in % of GDP

0

20

40

60

80

100

120

140

160

180

0

10

20

30

40

50

60

70

80

90Euro-zone average

Total assets of banks in % of GDP

Stock market capitalisation in % of GDP

Potential

Euro

zo

ne

CEE

to

tal

Cze

ch R

epu

blic

Slo

vaki

a

Slo

ven

ia

Hu

ng

ary

Cro

atia

Pola

nd

Bu

lgar

ia

Ro

man

ia

Ukr

ain

e

Hungary

BA/CA 90% HVB 100%


Staff 803 432

Offices 25 19

Universal bank with a strong market position in

corporate banking, very active in money and

capital markets, market leader in custody busi-

ness, strong focus on retail banking.

High competence level in project financing and

structured foreign trade financing.

In Hungary, Bank Austria and HVB together are

the third-largest international bank. 10% interest

held by Banca Intesa

71

Bank Austria Creditanstalt d.d. Ljubljana had a very successful year in 2000 –

the bank was able to further enhance its leading position among international

banks in Slovenia. For the third time in succession Euromoney named it “best

foreign bank in Slovenia”. A particularly favourable trend was seen in business with

companies: lending volume rose by an impressive 61% on a tolar basis. Loans to

the public sector more than doubled. Lendings to retail customers increased by

34% on a tolar basis, not least as a result of mortgage loans being introduced by

the bank. On the deposits side, too, substantial growth was achieved in both local

and foreign currency. The range of services was widened with the successful

introduction of electronic banking. In response to market liberalisation, the bank

established a separate securities division to use new business opportunities. In the

custody business the bank expanded its market leadership position by winning new

major customers.

Bank Austria Creditanstalt Croatia d.d., in whose share capital the EBRD

holds a 20% interest, continued to develop successfully in the reporting year. The

existing branch network was enlarged to five branches as the bank converted its

representative office in Split into a branch office. The bank consistently strengthened

its position in retail and corporate banking, the number of corporate customers

rose by 60%, those of retail customers by more than 34%. Business activities focus

on investment and project finance, foreign exchange trading and custody business.

Bank Austria Creditanstalt Croatia will further broaden its range of services,

especially for the target groups comprising international and export-oriented

Croatian companies as well as high-income private customers.

In 2000, the banking subsidiary in Romania, Bank Austria Creditanstalt Roma-

nia S.A. (BA/CA Romania) continued its successful development as a universal bank

in a difficult economic environment, with total assets increasing from about 1 60 m

to just under 1 190 m. In May of the reporting year, the bank officially opened its

second branch in the city centre of Bucharest, the third branch will follow in spring

2001 in Temesvar. Through cooperation with two local banks which operate fully

developed distribution networks, BA/CA Romania offers its customers accelerated

payment transactions in all of Romania’s major business centres. The range of prod-

ucts was widened to include car finance, debit cards and telephone banking. The

bank also made preparations for the introduction of Internet banking, which will

be actively offered in spring 2001. The strong commitment of the young team of

employees led to the bank being nominated for the “best Romanian bank in 2000”

award by a renowned Romanian business magazine.


Slovenia

BA/CA 99.5%

Established 1990

Staff 209

Offices 4

Strong in retail and corporate banking,

largest international bank, leading market

position in custody business, capital market,

treasury and investment banking activities

Croatia

BA/CA 80% HVB 100%


Staff 132 21

Offices 5 1

Retail and corporate banking, expansion of

investment financing and project financing

activities. 20% interest held by EBRD

Romania

BA/CA 100%

Established 1997

Staff 97

Offices 2

Universal bank, corporate banking with a focus

on international export and trade finance as well

as project finance, first international bank active

in retail banking

The economic and political environment in Ukraine remained difficult, although

signs of an economic upswing were seen for the first time since Ukraine became

independent. JSCB “Bank Austria Creditanstalt Ukraine”, which was named

“best international bank in Ukraine” by Euromoney in 1999, continued to pursue

a conservative credit and market risk policy. The bank succeeded in winning as

customers the subsidiaries of several renowned international companies which

operate in the Ukrainian market as well as building business relations with major

Ukrainian companies in the steel, beverage and food industries. Custody business,

introduced in the reporting year, developed beyond expectations.

In the second year of recovery from the 1998 crisis year in Russia, Bank Austria

Creditanstalt (Russia) strengthened its leading position among international banks

and reported good results. The reorientation, initiated in 1999, of the business

policy as a universal bank and the related build-up of a network of six branch

offices in the Moscow area were successfully pursued in the reporting year. The

strategy pursued by the bank is supported by the fact that political conditions are

stabilising and the economic environment is improving. Fee-based business bene-

fited from the expansion of the branch network and the issuance of VISA cards. As

the number of retail customers rose by 7,100 to 8,800, and the number of

corporate customers by about 40%, total customer funds entrusted to the bank

tripled. Lending volume increased moderately, no provisioning was required in the

reporting year.

Bank Austr ia in Western Europe and overseas

Excellent development in Western Europe

Business activities in Western Europe developed extremely well in 2000. The Lon-

don Branch, which is by far the largest unit in this region, reinforced its market

position through a number of major financings and reported a strong increase in

profits. The smaller branches and banking subsidiaries in Munich, Milan and Zurich

recorded dynamic business growth, almost tripling their contributions to net income

before taxes. The representative offices in Madrid and Paris helped the bank to

gain a stronger foothold in Spain and France, leading to a significant expansion of

financing volumes in that region. These offices in the EU area are of strategic

importance in accompanying West European companies into Bank Austria’s core

markets in Central and Eastern Europe: by providing competent advice in the home

country and offering an attractive range of services in Central and Eastern Europe,

Bank Austria successfully expanded its market position in this customer segment.


Ukraine

BA/CA 75%

Established 1997

Staff 48

Offices 1

Commercial bank for domestic and international

corporate customers, focus on trade and project

finance and custody business. Interests held by

Aval Bank (no. 5 in Ukraine) and IFC

Russia

BA/CA 100% HVB (IMB) 41%


Staff 235 800

Offices 6 2

Product range meeting international stand-

ards for corporate and retail customers. With

a 41% interest, HVB is the main shareholder

of IMB, the fourth-largest bank in Russia

73

The London Branch was exceptionally successful in 2000. Benefiting from the

prospering London market, all business segments performed excellently, enabling

the London Branch to report very strong results. A particularly satisfactory trend

was seen in the lending business, which added value through its outstanding exper-

tise and distribution power. Outstanding transactions during the year included the

sole mandate for the structuring and international placement of a US$ 140 m

financing for OMV, Austria’s largest oil and gas company. The total volume of syn-

dicated loans which were contracted and placed in the market increased substan-

tially. Bank Austria London played a prominent role in major international transac-

tions for such companies as Lafarge, RMC, Singapore Airlines Leasing and France

Télécom. A second securitisation, “Mozart”, was finalised in the first half of the

year, underlining the reputation of Bank Austria Creditanstalt London as a promoter

of innovative financial structures.

Bank Austria Creditanstalt Deutschland AG is based in Munich and has a

branch in Berlin. In its tenth business year, the bank achieved its best results ever.

Lending volume as well as fee-based services were expanded by 25%. The bank spe-

cialises in serving corporate customers. It significantly widened its customer base

among companies which are engaged in foreign trade and have business links with

Austria and CEE, and gave many of them access to services provided by Bank Aus-

tria Group units in the CEE countries. Products such as summary accounts for export

revenues and cash management met with a very favourable reception in the market.

The finance company and the representative office in Milan were combined and

transformed into a branch. At the same time, business volume and the contribution

to profits were almost doubled. Local business activities focused on corporate finance

and project finance. The branch participated in major domestic and international

projects. The Milan Branch was particularly successful in cross-border business, an

area in which a strong market position has been built over the past few years. In

close cooperation with Banca Intesa and other Italian banks, the branch again

supported a large number of Italian companies in their business activities and in

finance-related issues in Austria as well as Central and Eastern Europe, and referred

them to Bank Austria Group offices. In the meantime, the Bank Austria Group has

become a banking partner for more than 1,800 Italian companies in this region and

it handles some 75% of payment transactions between Austria and Italy.


For Bank Austria Creditanstalt (Schweiz) AG, 2000 was a successful year, too.

In line with its strategy, the bank fully concentrated on private banking and asset

management. The acquisition of an 80% interest in Finacon, a Swiss private

banking company, was successfully completed. Assets under management rose

by some 30% in the course of the year. Earnings were very satisfactory.

The Brussels Representative Office of the Bank Austria Group serves as an

important information hub, acting as a link between the bank and European

Union agencies.

Ongoing training programmes and rapid transmission of information enable the

banking subsidiaries in CEE to advise their local customers on current assistance

schemes and financing opportunities.

Financial centres outside Europe

Overseas operations recorded mixed business trends. In Asia and South America,

contributions to profits were very satisfactory, whereas results in the US remained

disappointing in 2000.

For Bank Austria Creditanstalt American Corporation, 2000 was a difficult

year. As provisions for loan losses had to be substantially increased, this business

segment reported a loss. Overall, the results of the US units were balanced. The

main task of the new management appointed in spring 2000 was to restructure the

loan portfolio and downsize operations. The representative offices in Chicago,

Atlanta and San Francisco were closed.

The business units in Asia achieved a strong increase in profits, resuming the

trend of results experienced before the outbreak of the Asian crisis. A favourable

trend of risks supported the strong earnings position. The Hong Kong Branch

focused on its participation in large-volume financings for first-rate borrowers. Posi-

tive economic trends in China stimulated the business environment in Hong Kong.

The economic recovery in South-East Asia advanced more slowly than expected.

Nevertheless, the Singapore Branch was able to use attractive business opportu-

nities both in its narrow home market and in Australia. Activities in structured trade

finance were intensified within restrictive risk parameters. The branch achieved

excellent results for the year, based on good earnings from current business, suc-

cess in restructuring old loans against which provisions had been made during the

Asian crisis, and a lean cost structure.


75

Activities in the overseas regions focus on local business, providing assistance to

Austrian companies and cooperating with selected local banks. The representative

offices in Beijing and Tokyo also play an important role in this context. Through

its local presence, the Bank Austria Group has provided services to Austrian

exporters in a competent way for many years and thus enjoys a particularly high

market share in this important customer segment.

Successful subsidiaries in Latin America

Brazil experienced a phase of political and economic consolidation in the report-

ing year. The inflation rate dropped to a low level of 6%, GDP growth reached 4%.

In this favourable environment Banco BBA-Creditanstalt S.A. (Banco BBA-CA)

strengthened its position as a leading wholesale bank in Brazil and generated

excellent results. Its customers include most of Brazil’s top companies. The bank

repeated the traditionally good results achieved in international business (primarily

trade financing) and in treasury operations. Credit risks developed favourably. An

increasing contribution to overall results came from new business segments, in-

cluding asset management, private banking and capital markets. FINAUSTRIA, the

car finance subsidiary of Banco BBA-CA, successfully expanded its activities and is

now among Brazil’s leading consumer finance institutions. Banco BBA-CA’s asset

management company, BBA Capital Icatu Investimentos, joined forces with Icatu

Investimentos in the reporting year. Today it is the largest local asset management

company not associated with a retail bank.

Contrary to the general trend in Argentinian banking, Banco B.I. Creditanstalt

S.A. improved its position, posting a 30% increase in net income after taxes. The

good results were supported by success in retail lending, in trading activities and in

the investment portfolio, which more than offset declining profits from corporate

banking. By establishing an asset management company, the bank took account of

the new market opportunities available in the mutual fund business. Creditanstalt

Leasing S.A. Argentina, a Buenos Aires-based joint venture with Bank Austria

Creditanstalt Leasing GmbH of Austria, concluded the first full business year with

a positive result.


International f inancing

International loan markets showed mixed regional trends in 2000: in Western

Europe, particularly in the wake of continued lively activities of many companies in

the area of mergers and acquisitions, sustained strong demand was seen in the

Euroloan market; on the other hand, the number of transactions newly brought to

the market in the region of Central and Eastern Europe was relatively small, though

higher than in previous years. In close cooperation with our local banking sub-

sidiaries, our new business in this region concentrated on first-rate business partners,

with strong emphasis being placed on relationship management and earnings

potential.

In Western Europe we continued the successful path of selective growth in cor-

porate banking, especially with a view to exploring and realising cross-selling

opportunities available in the CEE area with subsidiaries of multinational companies

operating in these countries. In this context, cooperation with our representative

offices in Paris and Madrid as well as with our CEE banking subsidiaries has proved

highly successful.

CA IB Investmentbank

CA IB further expanded its presence in Central and Eastern Europe and strength-

ened its position especially in the corporate finance advisory sector, where

commission income from mergers & acquisitions business reached a new record

level. Based on the current portfolio of mandates, this business is set to achieve

above-average earnings in the future.

Capital market trends in 2000 were mixed. After a promising first six months the

situation in the international financial markets deteriorated significantly. CA IB

Investmentbank was unable to escape this development. The sharp decline in the

New Economy sector had an impact on trading income.

One of the most successful transactions in 2000 was the initial public offering of

PKN Orlen, the Polish oil and gas company. This transaction involved a volume of

over US$ 500 m and was named “Deal of the Year” by Privatisation International.

Another milestone was the privatisation of Bulbank, Bulgaria’s largest bank.

Bulbank was sold to UniCredito and Allianz for 1 360 m.


Strong market position of CA IB in

corporate finance advisory and

in the CEE countries

77

CA IB executed several advisory mandates in the telecom sector. On the Vienna

Stock Exchange, despite a difficult market environment, CA IB placed the 1 1.2 bn

share offering of Telekom Austria, the largest privatisation in Austrian history.

Telekom Austria had previously been advised by CA IB on the acquisition of Czech

Online, an Internet service provider. CA IB acted as joint global coordinator in the

privatisation of Lithuanian Telecom, and as regional lead manager in the placement

of the Austrian tranche of Deutsche Telekom’s capital increase. In the privatisation

of Macedonian telecom monopolist Makedonski Telekomunikacii, CA IB advised

MATAV, the Hungarian company which led the buyers’ consortium.

With the IPOs of JoWood and Yline in Vienna as well as the private placement

of EMTS on the Zurich Stock Exchange, CA IB was successfully active in the New

Economy sector during the first half of 2000.

caibon Internet Services AG, CA IB’s online brokerage subsidiary, successfully

launched trading platforms in Hungary and Poland. By the end of 2002, caibon

plans to serve 9,000 investors.

In Hungary and Poland, CA IB has been established as a provider of asset man-

agement products for many years. In this fast-growing segment CA IB has secured

significant market share. These activities are planned to be expanded in response

to increasing demand for attractive investment instruments.

The number of awards received by CA IB reached a peak in 2000. For the sixth

time in succession, Euromoney named CA IB “Best Foreign Securities House in Cen-

tral and Eastern Europe”. CA IB’s local units in Austria, Bulgaria, Croatia, the Czech

Republic, Hungary, Romania, Poland and Slovenia attained top positions in these

Euromoney rankings, too. Another Euromoney survey confirmed CA IB’s position as

top lead manager in Central and Eastern Europe. The corporate finance unit was

awarded “M&A Advisory House 2000” by Central European. Global Investor and

Reuters named CA IB “leading broker in Austria”. The European Association of

Securities Dealers (EASD) stated that, since the establishment of EASDAQ, CA IB

was the most active lead and co-lead manager.


High-volume advisory mandates in the

telecom sector

Awards confirm CEE competence

78 Financial Markets

Financial Markets

The Financial Markets segment is the portal to the international financial markets

which Bank Austria makes available to its customers, and which the bank uses to

support its own sales divisions as well as for its own purposes. This business

segment comprises the Group Treasury Division, which conducts trading activities

in foreign exchange, money and fixed-income markets. The division includes the

Corporate Service Desk, custody services and the expert teams, from financial

engineering to research. Also part of the Financial Markets segment are equity

trading activities and (short-term) equity positions held for trading purposes as well

as other current financial assets.

In addition to the direct market activities, Financial Markets also performs

asset/liability management to optimise the balance sheet structure of Bank Austria

and Creditanstalt. Structural income from maturity transformation is recorded by

Financial Markets and not by the other business segments.

In interpreting the key figures for the Financial Markets segment and the net

trading result achieved by the Group as a whole, the reader should bear in mind

that the Group Treasury Division provides extensive inputs to the customer-service

units of the other business segments, which are partly recorded as trading results

by these segments.

In 2000, foreign exchange, money and capital markets were characterised by a

weak euro, a radical change in mood concerning the New Economy, and by

restrictive interest rate policies pursued by central banks. It was only around the

turn of the year, when signs of a pronounced slowdown in the US economy became

visible, that the US Federal Reserve responded by lowering key interest rates in steps

of 50 basis points each.

Net income before taxes generated by the Financial Markets segment declined

by 20%, mainly due to an unsatisfactory fourth quarter. Net interest income fell

substantially. While net fee and commission income rose by 30%, the net trading

result lagged 30% behind the previous year’s level. The result of other operating

activities largely reflects the realisation of long-term investments which had been

made in special-purpose companies and were thus recorded as sales even if, from

a business management point of view, this constitutes results from financial fixed

assets.2000

Net trading result by segment

3 m

0

20

40

60

80

100

120

140 5 137 m

33%

18%

22%

14%

13%

Equity Interests, other

Corporate Customers



Financial Markets

Key figures – Financial Markets

1 m 2000 1999 Changein %

Net interest income 111 217 – 49%

Losses on loansand advances 9 – 2 n.a.



General administrativeexpenses – 190 – 169 12 %

Result of otheroperating activities 101 – 7 n.a.

Net income before taxes 90 113 – 20 %


Risk-weightedassets (average) 4,613 5,152 – 10 %





79Financial Markets

Focus on CEE financial markets and flexible instruments

The concept of a department offering integrated services in all instruments

(bonds and bond options, swaps, FRAs, credit derivatives) in the emerging markets

of the European time zone has proved highly successful. Through the usual division

of activities into trading, sales and new issues, and in close cooperation with our

local subsidiaries in Central and Eastern Europe, the Bank Austria Group made

effective use of its CEE competence to serve customers and generated good results.

In these markets, the research unit of Bank Austria plays a particularly important

role. Economic analyses, market research and specific analyses are appreciated by

business partners in East and West.

The year 2000 saw extreme volatility in the markets of Central and Eastern

Europe, too, due to general stock market weakness and local crises in Argentina

and Turkey. In CEE, a surprisingly sharp increase in interest rates in Poland was

caused by higher-than-expected inflation rates, very strong economic growth,

political uncertainties and a large current account deficit. The situation did not ease

until shortly before the year-end. On the other hand, bonds issued by Russia and

Kazakhstan soared as oil prices rose strongly in the course of 2000 – Russia

outperformed all other emerging markets worldwide!

In the previous year, derivatives trading had been integrated into capital market

activities. The advantage of this move became clearly visible in the rapid develop-

ment of the Polish swap market and the extremely difficult market environment.

We were thus able to react flexibly and enhance our productivity. Our particularly

strong activity in new issues was reflected in the fact that we lead-managed nine

issues (including those of Pliva, the City of Kraków, the World Bank, Bremer

Landesbank, Bankgesellschaft Berlin), acted as co-lead manager for 39 issues and

participated in the syndicates for another 22 issues. Special highlights in 2000 were

further issues for Bank Austria, two denominated in PLN, four in CZK (including

two transactions of Bank Austria Creditanstalt Prague) and one in ZAR. On the sales

side, 2000 was an extremely satisfactory year, with a 32% increase in customer

transactions and a 20% expansion of the customer base, primarily through more

intensive efforts being made to win CEE customers.

Regional competence bundled in

transverse responsibility

Operating environment in CEE

countries continues to differ widely

Sought-after partner with a complete

range of products: customer

transactions up by one-third


Bond markets increasingly dominated by

corporate bonds

Large-volume corporate bond issues were again the dominant feature of activities

in the bond markets in 2000. In connection with the UMTS licence auctions,

telecom bonds had a crowding-out effect, measured by the number and volume of

issues, at the expense of other bond issues. Despite the turbulent environment, the

Bank Austria Group held its own in international new issues and issuing syndicates.

Measured by the number of transactions, the Group even advanced to the top 40.

Very good placement results were achieved both in corporate bonds and bank

bonds. In 2000 we acted as lead manager for seven issues (including Bank Austria,

Investkredit and HypoVereinsbank) as well as carrying out a higher-than-expected

number of co-management mandates.

The secondary market for government bonds was very quiet in 2000 after the

previous year’s sharp increase in yields. The 10-year euro benchmark yield ranged

between 5.5% and 5.2% during most of the year before declining to below 5% in

the December rally. The bond sales unit achieved significant market share gains

among institutional investors, substantially building and developing sales of

corporate bonds and structured products. The sales team will continue to concen-

trate on major products and customers in this segment. Customer service intensity

will rise further through the increase in market competence and the efficiency of

electronic media.

The credit/corporates business was marked by clearly widening spreads,

especially in the second half of the year. Sharply falling share prices, profit warnings

by a number of large companies and the enormous financing requirements in the

telecom industry led to considerable uncertainty in the corporate market, as did the

downgrading of a number of renowned companies’ credit ratings, also mostly in

the telecom industry. Nevertheless, this very uncertainty further enhanced the

importance of credit derivatives, especially credit default swaps. In combination

with the issue of regulatory capital requirements, this led to a strong rise in the

liquidity and volume of credit default swaps in the reporting period.

One of the focuses of our credit/corporates desk was on trading in credit default

swaps. In the course of the year, we achieved a very strong trading performance by

skilfully using the highly volatile spreads in the corporate bond market. These

activities concentrated on the automotive industry, utilities, and the telecom and oil

sectors. In the area of the Group’s own bonds (“Wohnbaubank” bonds, mortgage

bonds, supplementary capital, subordinated capital, etc.) we successfully

Bank Austria holds a strong

position in international issuing

syndicates and new issues

Sales team gains market share

among institutional investors

even in a quiet year

Highly successful credit trading,

liquid secondary market for

own issues

81Financial Markets

established a well-functioning secondary market. In connection with a significantly

stronger sales unit we recorded a sharp increase in transaction volume and per-

formance in this market segment.

Bank Austria became the first Austrian bank to offer its corporate customers

tailor-made structured financings via asset-backed securities or asset-backed

commercial paper. Such a transaction was successfully concluded in 2000. Our

client’s receivables were purchased by a US-based specialist company and funded

in international money and capital markets through the issuance of asset-backed

commercial paper. The company was thus able to improve its balance sheet and

further sharpen its focus on its core business.

The financial engineering team quickly proved to be a competent, reliable and

efficient contact and trading partner for all interest rate derivatives and structured

transactions. Both within the Bank Austria Group and in the interbank market the

team was able to translate these competencies into outstanding results, while

maintaining an appropriate risk/return ratio.

Bank Austria has always seen trading activities in financial markets as a competence centre whose function is largely

complementary to customer business and the bank’s own positions. This is fully in line with the customer-driven

approach of the HVB Group: under the heading of “integrated capital market approach”, the bank offers an efficient

interface with international capital markets, acting in close cooperation with other business segments as a link from

lending to the new world of capital markets and securitisation. Therefore CA IB Investmentbank and its CEE subsidiaries

will be integrated into this business segment effective in 2001.

The integration with HypoVereinsbank substantially improves the market position of our trading teams. Through its

status as a large bank, Bank Austria can enhance its competitiveness – in the interest of its customers – through sheer

weight, a stable rating and the placing power of a major capital market player. Above all, Bank Austria can now build

the Group’s market leadership position in the CEE markets with combined strength and put it to good use in the HVB

Group network.

Bank Austria offers corporate

customers asset-backed transactions to

help them manage their balance sheets

Financial engineering as a brain trust

and trading partner for interest rate

derivatives and structured products


Money and foreign exchange markets

Foreign exchange markets felt the impact of the euro’s weakness. We scored

two major successes in building and developing our services for our customers: as

part of our 24-hour trading service we offer our customers top-quality order

management; the second major success is foreign exchange trading via the Inter-

net, which we have been able to establish in the market within a short time, being

the first Austrian bank to do so. In this environment, contributions to profits were

mixed: the activities of our spot and banknotes & bullions units were very success-

ful, whereas the profit contribution from currency options business was below our

expectations. The FX Management department focused on CEE-related trans-

actions, further expanding business in forwards, options and spot transactions.

The Money Markets department achieved acceptable results for 2000, but did

not match the exceptionally strong performance of the previous year because the

interest rate environment was difficult, economic forecasts varied and the market’s

interest rate expectations were volatile. In 2000, increased use was made of interest

rate derivatives (interest rate swaps, overnight indexed swaps) for money market

dealings. Trading activities with international central banks was further intensified

through improved service.

Asset/liability management and funding

As the yield curve flattened – the combined effect of restrictive interest rate

policies and only small changes in long-term yields – asset/liability management

faced difficult conditions.

With 65 transactions, funding for Bank Austria and Creditanstalt in 2000

reached a total of 1 4.37 bn. Excluding bonds issued by Bank Austria’s and Credit-

anstalt’s banks specialised in raising funds for construction projects, and excluding

medium-term notes as well as subordinated bonds, the total volume of new issues

thus exceeded the previous year’s level by more than 75% (1999: 1 2.47 bn).

Corporate Service Desk

The Corporate Service Desk set up within the Treasury Division provides services

to corporate customers, branches and various departments of the Bank Austria

Group for exchange risk and interest rate risk management. In highly volatile

markets, the unit again achieved growth. Through competence and service quality

it also confirmed and strengthened its market position as the top provider of

services for corporate customers in Austria.

24-hour order management and

foreign exchange trading via the

Internet

Austrian yield curve

in % p.a.

Years to maturity

3.00

2.50

3.50

4.00

4.50

5.00

5.50

3M

12 M 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y

low:mid-May 1999

beginning of 2000

end of 2000

beginning of 2000

high: August 2000

83Financial Markets

In the second half of the year, the unit launched a bond sales initiative which

met with a very favourable response from companies. Efforts in this segment, too,

have already produced results. We will continue to expand our activities and our

range of investment products in 2001 as well as making increased use of market

potential.

Custody

The custody business was affected by negative trends in international stock

markets in 2000. After the successful integration of Budapest Bank’s custodian

business, which was acquired in the middle of 1999, the Group further expanded

its position in CEE countries despite the unfavourable international stock market

environment. Particularly good results were achieved in Hungary and Poland.

According to the most recent issue of the Global Custodian magazine, the Bank

Austria Group is among the top three providers of custody services in all countries

where it has commercial banking operations. The Group also received its first award

(“most improved custodian worldwide”) from the GSCS Benchmarks magazine,

namely for our subsidiary in Poland.

Emerging markets investments

Apart from investors’ fears of payment difficulties in Argentina and Turkey

towards the end of the year, the environment for emerging market instruments was

positive: Russia and Ecuador signed rescheduling agreements, an “investment

grade rating” was granted to Mexico. High oil prices gave many emerging markets

– primarily Russia, Venezuela and Mexico – large windfall profits without excessively

burdening oil-importing countries (including Brazil). These dynamic endogenous

developments were, however, overshadowed by US interest rate and stock market

trends, and in the course of the year, by fears of interest rate increases, New

Economy problems and fears over the business cycle.

Emerging markets outperformed all other markets, rising by 15.7%. The

Emerging Markets Investments unit made maximum use of limits in those countries

where (in retrospect) increases reached the highest rates, i.e. Russia and Mexico. It

also successfully managed its medium-term portfolio in such countries as Brazil and

Venezuela while making optimum use of derivative instruments for risk-minimising

investment strategies. This unit thus not only exceeded the performance of the

relevant market index by 100% but also made its highest-ever contribution to

Group results in the twelve years of its existence.

Leading position in custody services

in Central and Eastern Europe

Top performance of the EMI portfolio


Equity trading

Having started the year in a cheerful mood, stock markets and equity trading

ultimately faced one of the most difficult years of the past decade. Especially the

technology and growth markets, including Nasdaq and Neuer Markt in Frankfurt,

saw a spectacular slump in share prices. Euphoria over numerous equity issues,

above all in the sectors mentioned above, was followed by a more down-to-earth

attitude. Interest rate increases in several steps, higher oil prices and the slowdown

in the US economy caused many companies – particularly in the telecom, media

and technology industries – to issue profit warnings which gradually spread to

other sectors, demonstrating the high degree of diffusion attained by the New

Economy. Sectors which are less dependent on the business cycle, e.g. pharma-

ceuticals and luxury foods, showed positive trends.

Despite this unfavourable environment in international stock markets, equity

trading produced positive results. Although liquidity declined, above all on the

Vienna Stock Exchange, additional market share gains were achieved in customer

business and sales. As a specialist and market maker in a large number of instru-

ments in the Vienna stock, futures and options market, Bank Austria again made

an important contribution to Austrian capital market activities.

World stock market, overall

Financial sector

Source: Thomson Financial Datastream Indices

TMT = technology, media and telecom sectors

Stock markets under the sway of the ”New Economy“

Q1 1998 = 100

75

1998 1999 2000

100

125

150

175

200

225

250

275

300

Performance of major stock market

indices in 2000

End of 2000/1999

World stock market index* – 16.4%

Dow Jones, New York – 6.2%

Nikkei 225, Japan – 27.2%

EuroStoxx – 5.9%

DAX – 7.5%

ATX – 10.4%

Growth markets

Nasdaq – 39.9%

Nemax – 43.6%

TMT stocks* – 40.7%

*) Thomson Financial Datastream

85Equity Interests

For a number of years the Bank Austria Group has pursued a strategy which calls

for the disposal of those equity interests which do not complement the Group’s core

competencies as a financial services provider. The Group exercises care to protect

the interests of the affected companies and to take advantage of favourable

market conditions.

With its divestment policy with regard to non-banking equity interests, the bank is

responding to the desire of investors to create a portfolio pursuant to their personal

preferences from a range of narrowly focused companies operating in various

industries and regions. In order to evaluate the performance and outlook of an

investment, the capital market prefers transparent companies with clearly defined lines

of business (cf. chart Underperformance of diversified groups of companies). Portfolio

allocation is thus a decision to be taken by investors, and not by companies.

This also applies to the banking sector. In the capital market paradigm, a bank

which functions as an industrial holding company is a throwback to a time in which

banks also had to meet public-law related tasks. Since the completion of the

privatisation process, Bank Austria and Creditanstalt have re-defined their equity

interests strategy and are focusing, as customer-oriented universal banks, on the

financial services business. They have thus already pursued for some time the same

equity interests strategy followed by the HVB Group.

Pursuant to the concept of segment reporting in accordance with IAS, the “Equity

Interests” business segment includes only those companies which have not been

allocated to other business segments. Companies whose core business activities form

part of another segment are included in that segment. Companies in the Equity

Interests business segment primarily include the remaining non-banking equity interests,

some minority interests in the financial sector, including three regional banks of the

former Creditanstalt Group, and companies providing bank support or auxiliary services

such as real estate subsidiaries which maintain and manage buildings used by the bank.

This segment also includes subsidiaries that provide significant functions and services

for banking operations and which also offer some of these services to third parties.

Any evaluation of the performance of the Equity Interests business segment

(cf. table) must therefore take the above into consideration. In particular, when

interpreting ROE, the key profitability figure, as well as the items Net trading result

and General administrative expenses, it should be kept in mind that annual business

developments are determined by high-volume one-off transactions. In 2000, the

Equity Interests business segment made a substantial contribution to Bank Austria’s

business results. The item Net interest income, which also includes distributions by

equity interests, more than doubled. This also reflects the general improvement in

Equity Interests

Special status of business segment

“Equity Interests”

Key figures – Equity Interests

1 m 2000 1999 Changein %

Net interest income 191 84 >100 %

Losses on loansand advances 0 – 6 n. a.

Net fee and commission income – 14 2 n. a.

Net trading result 17 3 >100 %

General administrative expenses – 34 – 6 >100 %

Result of other operating activities 200 149 + 34 %

Net income before taxes 359 227 + 58 %






the health of the companies, in part the rewards from long-term restructuring

measures which were needed for listings on the stock exchange. The item Result of

other operating activities surpassed the previous year’s results by a significant

margin (1 200 m after 1 149 m) on account of gains from the sale of companies.

In particular, the income that Bank Austria has earned from its industrial holdings

in recent years, whether in the form of current income or from the realisation of

book profits, reflects a gratifying increase in profitability, bought at the price, in

some individual cases, of difficult transition years.

In the year under review, the pace of divestiture accelerated. Among others,

disposals included the Wienerwald restaurant chain (Austria and Germany), the

operating company of Wiener Hafen “WHL”, the stake in Wiener Messen und

Congress GmbH, shares in the Rumpold waste disposal group and Creditanstalt’s

shares in BBAG Österreichische Brau-Beteiligungs-AG. In the real-estate segment,

Creditanstalt sold off a large part of the ÖRAG Group, in particular domestic real

estate used by third parties.

In February 2001, publicly-traded Lenzing AG was sold for 1 90 per share to

Zellulosefaser Beteiligungsgesellschaft m.b.H., which in turn is owned by private

equity funds. The holding company will be domiciled in Austria, and production

facilities in Austria will be expanded. At the time of going to press, the necessary

approvals had not yet been obtained from the cartel authorities.

Income from non-banking equity

interests evaluated from the

perspective of long-term investments

Direct sales and the spin-off of a

portfolio comprising non-banking

equity interests accelerated pace of

divestiture in 2000

86 Equity Interests

*) Companies which cannot be unequivocally assigned to a particular industry

End of 1991 = 100, euro-zoneSource: Thomson Financial Datastream Indices

Underperformance of diversif ied groups of companies*

100 = euro-zone market index

1991 1992 1993 1994 1995 1996 1997 1998 1999 200060

65

70

75

80

85

90

95

100

105

87Equity Interests

Foundation created as innovative, capital market-

fr iendly solution

On 31 December 2000, the Bank Austria Group spun off most of its non-

banking equity interests held by both Bank Austria AG and Creditanstalt AG to the

subsidiary of an independent foundation in exchange for profit-sharing rights that

give the holder a claim to future income from these companies.

B & C Holding GmbH, the subsidiary company of the foundation which these

companies were brought into, operates independently of Bank Austria. A pro-

fessional management team has been assigned with the task of increasing the

profitability and value of the assets which have been contributed. In addition, the

bundling together of non-banking equity interests against issuance of profit-sharing

rights creates the possibility, at a later stage and after conversion of the profit-

sharing rights into shares, of making these interests available to a broader investing

public via the exchange. B & C Holding holds shares in some twenty-five companies,

including the publicly traded companies Austrian Airlines Österreichische Luft-

verkehrs AG, Semperit AG Holding, Voith Sulzer Papiermaschinen AG, Austria Email

AG and Imperial Hotels Austria AG, in addition to equity interests in Gewista

WerbegesmbH, Wiener Betriebs- und BaugesmbH, Vereinigte Papierindustrie- und

Allgemeine Warenhandels AG, Wiener Porzellanmanufaktur Augarten GesmbH and

a number of other companies, primarily in the fields of trade, services and tourism.

Report on individual equity interests

Bank Austria Treuhand AG, a consolidated company, continued to operate

successfully in 2000 as a specialty bank for participation models, particularly in the

areas of real estate financing and financing for medium-sized companies. With

a market capitalisation of 1 462.8 m, Bank Austria Treuhand AG represents some

30% of the total market for Austrian real-estate securities. This includes the

investment products of Immotrust Anlagen AG, BA Immofonds and BA-Wohnbau-

fonds 1–6.

Following a share-capital increase in September 2000 of 1 11.3 m, the market

capitalisation of Wohnbau-Gewinnscheine (residential construction profit-sharing

certificates) grew to 1 273.5 m, which thus represents the lion’s share of real-estate

securities offered by BA Treuhand. Demand remains high for Wohnbau-Gewinn-

scheine, particularly among private investors. Bank Austria Treuhand AG has also

increasingly offered third-party products in the field of tax models since 2000.

Placement on the capital market

a possibility in the future

Companies performing a significant

function complementary to banking

business

Dataservice Informatik GmbH is the software house of the Bank Austria

Group, for which it also provides most of its services. In 2000, the company

focused on realising the common data-processing platform for Bank Austria and

Creditanstalt (the “heureka!” project), which went into operation as scheduled on

17 July 2000. This brought to a successful conclusion the three-year project which

had involved the entire bank. The name of Dataservice Informatik GmbH was

changed to WAVE Solutions Information Technology GmbH on 28 November 2000.

Bank Austria’s former organisation department was brought into the company, and

beginning 1 January 2001, in addition to software development, organisational

services and group information technology activities in the CEE region were also

brought together within the company (for more information about WAVE, refer to

page 102 of the Annual Report.)

CA Immobilien Anlagen AG ended the 2000 business year on a very successful

note. Real estate assets total some 1 268.9 m, which represents an increase of

50%. Gross yields (rental proceeds in terms of acquisition costs) rose from 6.2% to

7%. This was due to the purchase of office space in Budapest and Bratislava, and

to the restructuring of the domestic real-estate portfolio. With regard to the

company’s domestic properties, the largest property in the downtown area was

sold, and in turn two modern office buildings were purchased. In the coming

business year, the company will continue to pursue its strategy of acquiring

property in the capitals of Eastern Europe.

In the second half of the year, most of the domestic properties held by ÖRAG

were transferred to the newly-created ÖRAG Österreichische Realitäten AG

pursuant to a spin-off transaction. This newly-created company and other domestic

properties owned by ÖRAG were then purchased by the Karl Wlaschek Privat-

stiftung business group. The company’s other domestic real estate assets, which

largely comprise Creditanstalt’s technical centre in Vienna’s 9th district, and

foreign equity interests remained in “ÖRAG alt”, whose name was changed to

CA Betriebsobjekte AG. In 2000, CA Betriebsobjekte AG, whose results flow

directly into Creditanstalt’s income statement on account of an existing full

integration agreement, achieved positive results from its ordinary business activities

in addition to extraordinary income from the real estate transaction.

88 Equity Interests

Service subsidiaries

Real-estate subsidiaries

89Equity Interests

Adria Bank AG deals primarily with the financing and documentary settlement

of import, export and transit transactions promoting trade relations between

Austria and the successor countries of Yugoslavia. The company fulfilled its role as

a specialist institute in the guarantee business, on the money market and in the

interbank business. The diversification of business transactions undertaken by the

company took place largely within Europe.

Despite the increase in total assets, the bank was only able to match the level of

income achieved in the previous year on account of unfavourable market

conditions during the business year. Adria Bank remains committed to pursuing its

successful business strategy, while carefully observing economic and political

developments in the successor countries of Yugoslavia, and will press ahead in its

cooperative efforts with shareholders and their customers and with the established

and newly-created banks in the region.

In 2000, Bank für Kärnten und Steiermark AG was able to benefit from the

economic upswing on its market, and achieved group operating results of 1 38.4 m

(1999: 1 30.3 m). Net income amounted to 1 21.4 m, an increase of 6.9% over

1999. On account of the strong expansion in business volume, the profitability

developments at the company were based on a very sound foundation. Net inter-

est income continued to develop favourably, with an increase of 9.1% to 1 55.4 m.

In addition, net fee and commission income, which is based on the securities sector,

grew strongly, by 19% to 1 37.0 m. Operating income climbed some 11.9% to

1 99.7 m, with the service business accounting for more than a third of these

figures. As the bank consistently took advantage of opportunities to cut costs,

operating expenses, which totalled 1 62.4 m, rose by a modest 5.2%. Total assets

climbed by 10.6% to 1 3.4 bn in a year-on-year comparison. This increase was due

largely to the item Loans and advances to customers, which grew by 15% to over

1 2.0 bn. Bank für Kärnten und Steiermark also worked actively in 2000 to

continue to refinance a portion of its business growth via primary deposits, which

grew by an above-average 5% to 1 1.8 bn.

Bank für Tirol und Vorarlberg (BTV) had a successful year in 2000. At

1 5.11 bn, the bank’s total assets were 16.6% higher than in the previous year. The

most important source of growth on the assets side of the balance sheet were

loans and advances to customers, which increased by 13.9% to 1 3.45 bn. On the

liabilities side, primary funds developed favourably, rising by 16.1% to 1 2.97 bn,

at a higher rate than the Austrian market as a whole. The strong customer

preference for high-yielding investment forms is reflected in the volume of

securities held in custody accounts, which expanded by 1 0.39 bn to 1 4.41 bn.

Equity interests in the banking sector

Operating income grew by 20.9% to 1 136.7 m. Income from securities business

rose by 1 9.4 m, thereby becoming the most important component of fee-based

business. Operating expenses grew by 19.1% to 1 81.3 m. The major factors

leading to this increase were higher allocations to the pension provision required

on the basis of new actuarial tables, the transfer of future pension benefits to the

pension fund, and higher spending on structural alterations. The operating result

rose by 23.7% to 1 55.4 m. Successful risk management made it possible to reduce

the amount set aside for provisions to below the previous year’s level. The results

from ordinary business activities increased by 71.9% to 1 41.0 m. Net income

reached 1 29.5 m, an increase of 90.2%.

Oberbank AG enjoyed another very successful business year in 2000. Operating

results increased by 23.7% to 1 91.2 m. This increase is due to strong growth in

income from the interest-based business (up 10.5%), and from growth of 21.4%

in net fee and commission income. In the services segment, the securities business

generated the most significant income. Income from trading activities was below

that of the previous year. Ongoing cost-saving measures were successful in keeping

cost increases to a minimum. Operating expenses grew by 6.1%. This increase was

due largely to higher allocations to pension provisions made necessary on account

of new actuarial tables. The results from ordinary business activities increased by

26.0% to 1 46 m, and net income by 23.0% to 1 32.2 m. Oberbank’s total assets

grew by 8.4% to 1 8.5 bn. Growth in credit volume was particularly strong at 9.2%

to 1 5.5 bn. Primary funds also increased by a significant 8.0% to 1 4.8 bn. The

range of services in the private equity segment was expanded, with a particular

focus on innovative, medium-sized companies. In the retail banking business,

Oberbank worked to promote portfolio management based on funds. At year-end,

Oberbank maintained 98 branch offices in Austria and abroad.

Investkredit Bank AG is active in the long-term financing, corporate finance,

equity financing and consulting, investments, treasury and real estate business

segments. The total assets of the Investkredit Group (comprising Investkredit Bank

AG, Kommunalkredit Austria AG and other specialised subsidiary companies)

climbed by one-third to some 1 9 bn. The financing business experienced

exceptionally strong growth in the areas of public-sector financing and securities

financing. Corporate finance, equity financing and consulting and corporate

treasury services expanded as well. In the real estate sector, Investkredit consistently

implemented its strategy of acquiring rented office space in countries which are

candidates for EU membership. Kommunalkredit, a 51% subsidiary of Investkredit

Bank AG, and Dexia, a French company holding a minority interest in Kommunal-

90 Equity Interests

91Equity Interests

kredit, together acquired a majority interest in Slovakia’s Prvá Komunálna Banka.

According to preliminary results, both net income before taxes and also key figures

such as return on equity and cost/income ratio will show significant improvement.

Oesterreichische Kontrollbank AG is the authorised agent for the Republic of

Austria under the Austrian Export Promotion Act. In this capacity it issues

guarantees for export loans and protects the interests of the Republic of Austria. It

also refinances export loans pursuant to the export financing procedure. Other

business segments include the settlement of fiduciary transactions and syndicated

finance. Kontrollbank serves as office for bond issues, the principal paying agent

for securities and as reporting office pursuant to the Austrian Capital Market Act.

In addition, it also serves as central securities depository, and plays an important

role in the automated settlement of on and off exchange securities transactions.

Despite the decline in profitability caused by the cessation of trade settlement

activities for the Vienna Stock Exchange, results from ordinary business activities

remained at a very satisfactory level in 2000.

In 2000, the Wiener Städtische Group saw its consolidated premium income

increase to more than 1 2.5 bn. Foreign subsidiary companies made an exceptional

contribution to this growth, and accounted for almost 20% of group premiums.

The strongest rate of growth was achieved by Kooperativa in the Czech Republic,

which has operated successfully in the privatised market for mandatory liability

insurance for automobiles since the beginning of 2000. Kooperativa is Wiener

Städtische’s largest foreign subsidiary. Futura Lebensversicherung and a 100%

interest in InterRisk AG Wiesbaden were also acquired in 2000, and Vienna Life

commenced business operations in Poland. In Austria, the growth in premium

income was largely due to the life insurance business, in particular fund-linked life

insurance policies. While the company succeeded in bringing to a halt the trouble-

some decline in premium income from the automobile insurance segment, the

technical results in this segment remain unsatisfactory. The results of the publicly-

listed Wiener Städtische AG were negatively affected by developments on

international financial markets and by the requirement in a law accompanying the

budget that provisions be subject to taxation.

Bank Austria currently maintains numerous cooperation agreements with

Wiener Städtische AG, including UNION-Versicherung, a joint venture together with

a third partner (see the section on Private Customers and Professionals), and

CA-Versicherung AG.

Equity interests in affiliated companies

in the financial sector with which there

are a number of cooperative business

agreements

Bausparkasse Wüstenrot AG concluded over 200,000 building society

contracts with a total contractual amount of 1 3.9 bn in 2000, its 75th anniversary.

The inventory of savings contracts exceeded 1.2 million contracts at year-end 2000

(contractual amount: 1 19.7 bn). Building society savings deposits totalled 1 3.8 bn,

while mortgage-backed loans and other (not mortgage-backed) loans amounted to

1 2.7 bn. Of particular significance is the fact that in 2000, 1 785 m in loan

disbursements for building projects represented an absolute financing record (1999:

1 501 m). This tremendous demand for building society loans indicates that

building society financing is once again an attractive option and – following the

sharp decline in 1999 – has again achieved its earlier significance.

In 2000 Wienerberger Baustoffindustrie AG continued to successfully focus

on its core business (wall, ceiling and roofing systems), with turnover increasing by

18% to 1 1.1 bn despite setbacks in Germany. Business developments were

particularly favourable in the US and in Eastern Europe. Both regions saw clear

improvements in terms of volume and prices with respect to the previous year. In

the “pipe systems and waste water technology” segment, turnover increased by

39% to 1 419 m, with Pipelife and Semmelrock contributing to these results.

With the sale of Treibacher Industrie AG and its remaining interest in Wipark

Garagen, the Wienerberger Group continued to withdraw from non-core business

activities. With group turnover of 1 1.67 bn, results before taxes amounted to

1 220 m.

The Austrian operations of Lambacher HITIAG Leinen AG broke even in 2000.

At Karolina, the Hungarian subsidiary where a production facility was built in 1999,

there were a number of start-up problems during the year, which have however

largely been resolved. Thus the financial results for the 2001 business year are

expected to be positive.

Lenzing AG had an extremely successful year in 2000, and turned in record

results. Strong market demand for fibres led to plants operating at full capacity and

– in connection with the structural improvements made over the past few years –

to considerable gains in turnover and results. In addition, positive market develop-

ments and the continued strong demand for Lenzing fibres made several price

increases possible. Demand for special fibres was exceptionally buoyant. At the

business site in Lenzing, the production of innovative, technology-intensive fibres

already accounts for some 60% of capacity. The Lyocell fibre is very successful:

planned production capacity was increased in June 2000 to 20,000 tonnes per year,

and there are plans to further expand capacity at the plant in Heiligenkreuz.

92 Equity Interests

Equity interests in companies outside

the financial sector

93Equity Interests

In addition to fibres, the company’s core business, Lenzing Plastics, Lenzing Technik

and the paper business segment also made significant contributions to turnover

and results. As mentioned earlier, Lenzing AG was sold in February 2001.

Allgemeine Baugesellschaft – A. Porr Aktiengesellschaft was able to further

increase its turnover by some 4% (without an additional interest in Teerag-Asdag

AG). The growth in turnover is due mainly to developments on the domestic

market. With the integration and assumption of the industrial management of

Teerag-Asdag AG, the consolidation of the Teerag-Asdag Group took place for the

first time in 2000.

In December 2000 an agreement was concluded regarding the sale of the

domestic construction division of Universale-Bau AG, including related equity

interests and Universale-Bau GmbH in Munich, to Alpine Mayreder Bau GmbH. All

real estate properties and Universale-International, the project development

subsidiary, remained with Universale-Bau AG. In future, Universale-Bau AG will

concentrate its business activities on the management and sale of its real estate

holdings, and on the project development activities of Universale-International.

Österreichische Verkehrsbüro AG (ÖVB) continued to pursue a growth-

oriented business strategy in 2000. Total turnover amounted to some 1 349 m.

With over 115 travel agency branches in Austria and abroad, and with 25 hotels

which are operated on a lease or management basis, ÖVB is the largest tourism

company in Austria. Including the group companies Intropa Reisebüro and

Eurotours GmbH, some 1,400 employees achieved group sales of 1 436 m. In the

hotel management sector, some 480 employees realised total sales of 1 34.5 m.

Foreign branches achieved sales of 1 34.2 m with 670 employees. Sales and results

are expected to continue to develop favourably in 2001.

Over the past several years, transaction and settlement services in a broader sense

have advanced from being a “back office activity” for the banking industry to

becoming a competitive factor of strategic importance. Demands and competitive

pressures are increasing from three sides: first, transaction volume is increasing

exponentially, particularly in the securities business. In Austria, this has been largely

on account of the securities boom, which ignited in the country somewhat later

than in other markets. On account of the catch-up process in the CEE countries,

this trend should continue in coming years. The growing use and increasing

diversity of capital market instruments on both investor and borrower sides will be

further strengthened by new channels such as e-banking and e-brokerage. Secondly,

transaction times, both in terms of data entry and data processing, are being

reduced, and open networks are creating greater transparency. The task of

information technology is to coordinate this complex array of channels and inter-

faces and create a uniform platform. Thirdly, a market for transaction services has

arisen within the financial sector itself. Highly-specialised providers are forcing their

way into the traditional value added chain and are increasing competition based on

price. Competition is continually increasing the pressure to improve productivity and

raising the investment threshold.

In this environment Bank Austria has taken advantage of the integration with

Creditanstalt to achieve significant synergies with regard to information technology,

transaction and settlement banking, facility management and corporate logistics.

The successful introduction of uniform data processing systems at Creditanstalt and

Bank Austria reflects the Group’s competence and efficiency. The service units –

most of which are run as subsidiaries – operate as independent companies which

already offer their services to third parties. The high level of cost transparency

which has resulted has made a significant contribution to the stability of the bank’s

general administrative expenses. With the experiences made in 1999 and 2000, the

service area within Bank Austria will approach its integration tasks at a higher,

cross-regional level – CEE and HVB Group.

Electronic banking proves its worth

Many of the exaggerated expectations with regard to the “New Economy” were

brought down to the ground of the “Old Economy” in 2000. Bank Austria

continues to believe in the future of new channels and sees itself as a technology

leader within the HVB Group. In this regard Bank Austria follows a practical,

evolutionary approach.

Information Technology

Information technology, transaction

and settlement bank, and an efficient

infrastructure are not only cost factors,

but also important competitive factors

Market-based approach to providing

services increases transparency and

raises cost consciousness

Financial management via e-banking

offers medium-sized companies products

formerly limited to large companies

96 Information Technology

97

In the last several years, the use of electronic banking has become commonplace.

As at the end of December, the Bank Austria Group managed more than 500,000

electronic banking accounts. In addition to large companies, smaller companies and

a growing number of private households are also handling their banking transac-

tions electronically. Individuals already account for every three out of four users.

Corporate customers (B2B), however, account for most of the volume that is

settled. With “BusinessLine”, “BusinessCash” and “BusinessPlanner”, corporate

customers have three different telebanking services at their disposal. Unlike the pre-

vious version of “Telebanking”, the “BusinessLine” software now offers structured

payments and extended securities services. The latest version of “BusinessLine” will

be released soon, and includes a “euro assistant” that enables users to convert

accounts quickly and easily from schilling to euro. This product is of special sig-

nificance for small and medium-sized companies, since only a small number of

companies in this segment keep their books in euro. In 2000, following

comprehensive testing, we successfully introduced “BusinessCash”, a professional

liquidity management program. It shares a common database with the basic

“BusinessLine” module, helping the program to achieve a high level of user

friendliness. For businesses, select and professional financial planning is becoming

increasingly important. For the customers of the Bank Austria Group we therefore

developed the “BusinessPlanner” software. Among other features, “Business-

Planner” allows customers to prepare a projected income statement and a projected

balance sheet at the touch of a button. Together with “BusinessLine” and

“BusinessCash”, we are able to offer to our commercial customers compact tools

for up-to-date financial management. In addition, the PC software can communi-

cate with the Internet using the TCP/IP protocol. The bank is now developing pure

B2B banking solutions.

For our subsidiary banks in Central and Eastern Europe, we have developed a

cash management model that allows the linkage of all accounts carried within the

Bank Austria Group, and thus offers the decisive advantage of margin pooling:

accounts in national currency can be integrated into a cross-border cash manage-

ment system.

Since September 2000 Bank Austria has maintained a new homepage in the

Internet. It is now possible, for the first time, for users to configure the Bank Austria

homepage to meet their individual needs via “My Page”. The individual preferences

range from special topics to news services via “My Inbox”. Bank Austria’s current

homepage combines online banking and product information on a single page: the

customer’s financial status is integrated in “My Page”, and he needs to login only

Modern financial management for

companies via e-banking

Via the personalised homepage to

Internet banking for individuals


Number of online accountsin thousands

0

100

200

300

400

500

1998 1999 2000

once to access online banking and his personal homepage. The online banking

module is offered free of charge to all holders of personal current accounts at the

Bank Austria Group.

Creditanstalt also introduced a new homepage at the beginning of 2000. Almost

450,000 hits, a threefold increase, testifies to the fact that the number of visitors

to the homepage has risen significantly. Creditanstalt was particularly successful in

presenting active securities investors with near real-time prices for all important

exchanges, with chart analyses and with specific asset allocation accounts.

Altogether, the Bank Austria Group had over 200,000 online banking customers

at year-end 2000. These customers held over 500,000 online accounts, and the

figure is increasing sharply. In a website ranking made at the end of November

Despite the emotional ups and downs observed in 2000 with regard to the “New Economy”, the Internet remains

firmly on track as an unlimited communications and trading platform of the future.

Bank Austria is working to further develop its existing range of products with this environment in mind. The bank

offers its customers, via WAP, SMS and POP, the opportunity to access their accounts and submit queries from home, on

the road or from sales outlets via POP (Partner Online Payment). In the B2B sector, the orientation to customer processes

(STP) is being strengthened. The bank will pursue the concept of “market places” with business partners. Bank Austria

will open, in its name, portals on special topics which make the financial world accessible, for example, “Bauen &

Wohnen”, retirement planning, youth, starting a new business.

On account of the integration with HypoVereinsbank, Bank Austria’s e-business offerings are now on the verge of

making a quantum leap to becoming an Internet platform of European dimensions. The HVB Group is swiftly expanding

its capabilities as one of the leading Internet banks in Europe, and in 2000 alone invested some 3 250 million in these

capabilities. Products range from online banking via the Internet, to a real estate portal and archive services. In addition,

with the listed Direkt Anlage Bank (DAB), the Group is also one of the leading pan-European direct brokers. A goal of

the Group is to create a continuous series of links between the customer and the back office in order to increase internal

efficiency. Thus the project is also closely tied to the planned common “System3” IT platform. E-business activities will

be brought together on a supra-regional basis under the project heading “WebPower”. Pursuant to the Bank of the

Regions strategy, Bank Austria has assumed responsibility for WebPower in Austria and CEE, and in addition to

e-banking, can place its CEE Internet broker “caibon” on a platform which covers a large area.


99

2000 by the “Institut für Bankinformatik und Bankstrategie” at the University of

Regensburg, the homepages of Bank Austria and Creditanstalt were ranked 7th

and 9th from among more than 1,000 banks, a very respectable showing.

Growing productivity gains in payment transactions

The Group Payment Transactions Division sees itself as a production-oriented unit

(one which complements the banking business). Thus, in addition to absolute costs,

it views transaction volume, productivity and the degree of automation as important

performance parameters. In the domestic payment transactions area, paperless

transactions increased by 6% in 2000, while paper-based transactions were reduced

by 5% (to a share of just under 20%). Together with foreign payment transactions

(5% growth, including international payments by cheque), some 308 million pay-

ment transactions were settled in 2000, 4% more than in the previous year. In view

of the decline in staffing levels, this represents a productivity gain of 17%.

In Austria, the introduction of euro banknotes and coins will occur in tandem

with a conversion of data formats in electronic payment transactions to the

UN/EDIFACT format. The banking system already made the necessary changes to

meet these requirements at the beginning of 1999, and customers are now in the

process of making the necessary conversions. In 2000, following the smooth Y2K

transition, the Bank Austria Group intensified its informational campaign to draw

the attention of its customers (also in paper-based payment transactions) to urgently

needed euro-related preparations. By the end of 2001, numerous tests and

conversions to UN/EDIFACT will be carried out. The new data standard will open

the door to further innovation in payment transactions, such as Electronic Bill

Presentment and Payment. There are further benefits from the Internet linkage

(via XML) within UN/EDIFACT’s global and sectoral transmission standards.

Bank Austria is the unquestioned market leader in Austria in the area of foreign pay-

ment transactions. The Low Value Payment System STEPS initiated by the EBA (European

Banking Association, Paris) was put into operation in November 2000. This gives the

Bank Austria Group, which has participated in EBA clearing since 1997, a new channel

for small commercial payments with 93 banks (EBA is, based on the number of trans-

actions, easily the most successful cross-border clearing system, leading both TARGET

and EAF). The trend towards cooperative efforts and linkage of clearing systems and

providers is making no exception for payment transaction services. In this regard, an

agreement was made between ARTIS/TARGET and EBA in 2000 which sets the course

for the future. Beginning in 2002, the new SWIFT information channels “SWIFTNet”

will be used. Specialists from Bank Austria are involved in both of these projects.


The changeover to the UN/EDIFACT

format allows for numerous steps to be

automated prior to the introduction of

euro banknotes and coins

Market and technology leader in

foreign payment transactions

Transaction banking: GSS benefits from initial synergies

Since the merger of the respective Creditanstalt and Bank Austria functions at

the end of 1998, the Group Securities Services Division has been responsible for

securities services throughout the Bank Austria Group, including safe custody,

settlement and administation of securities accounts. Following the systems

integration in 1999, activities in 2000 centred on a restructuring in the direction

of a settlement/transaction bank with a strong internal customer orientation.

Products and processes continued to be standardised, with a focus on establishing

a concise list of services with transparent prices. The bank succeeded in significantly

improving quality and productivity by increasing automation accompanied by a

training initiative.

In 2000, the transaction volume again climbed sharply. As a trend over a period

of several years, volume has increased by 20% per year (see chart). In addition, the

growing variety of capital market instruments, longer trading hours and the

simultaneous acceleration of processes (from order routing to settlement periods)

placed significant demands on the bank. Based on the number of settlements,

transaction volume increased in 2000 by 29% to 2.9 million, which includes an

above average increase in derivative products (up 59%). The increase in staffing

levels remained significantly below the magnitude of this growth, and thus

productivity – despite numerous projects – again grew by over 15%.

Productivity increases as transaction

volume continues to grow

Further progress made towards

settlement/transaction bank


0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1997 1998 1999 2000 2001p 2002p 2003p+18% +15% +27%

Exponential growth in securit ies transactions

Millions of transactions

Bank Austria Group; total settlements: buy/sell domestic and foreign, derivatives, settled identification numbers, delivery/payment business and transfers between securities accounts

101

The safe custody department administers not only the Group’s own funds, but

also provides services to subsidiaries in CEE countries and external investment

management companies. The number of funds has increased by one-third to 467,

or significantly higher than 1 volume, which reflects both the diversification of

funds by themes and the sluggish year on the stock markets. However, there was

a slight decline (down 2% to 313,000) in the number of safe custody accounts for

securities (from direct investments and own business), caused by the phasing out

of anonymous safe custody accounts. The volume of securities held in safe custody

accounts, on the other hand, increased by 5%. 60% of this volume is accounted

for by Bank Austria, and 40% by Creditanstalt. In 2000, the securities services

department settled some 5% more capital-related transactions; the decline on the

domestic market was more than compensated for by the strong increase in the

number of safe custody accounts managed abroad. With regard to issuer services,

where the Bank Austria Group is the market leader in Austria, an acquisition drive

began in 2000, which included, for example, the flexible computerised settlement

of employee share ownership schemes.

As market maturity and depth increase, business with and via subsidiaries in CEE

countries and in conjunction with CA IB shows promising potential. “Custody”, a

leading service unit in this region which has been recognised for its excellence on

many occasions, was assigned to the Financial Markets business segment in 2000

for marketing reasons and in view of the clear separation of functions (further

details on page 83).

Over the next few years, the volume settled by Bank Austria will increase

substantially, on account of underlying market developments, the advances made

in e-brokerage and also in light of the upturn in CEE countries. In line with the

“Bank of the Regions” strategy of placing decentralised customer business on a

common technological platform, work is progressing towards the gradual integration

of transaction banking, for which a single IT platform is a prerequisite. In an age of

electronic networking, this issue is largely independent of locations. In initial

discussions held with HypoVereinsbank at year-end 2000, comparisons were made

between volumes settled, processing time as well as processes and structures. In

2001, detailed analyses and concrete discussions commenced with HVB’s Financial

Markets Service Bank with regard to potential productivity gains and synergies. This

specialised bank, which was created through a merger in April 2000, settled some

16 million transactions in the year under review. As insourcer, FMS also provides

services to nine customers outside the Group.

Market leader in safe-custody business,

fund administration and services

Additional productivity gains through

organisational measures. Exploration of

potential synergies with FMS Bank


Org/ IT, Support and Faci l i ty Management

At Bank Austria, organisation and IT functions are ensured by a number of

companies. The systems house of the Bank Austria Group, WAVE Solutions

Information Technology GmbH, succeeded the firm Dataservice Informatik GmbH

(DSI) at the end of 2000 and today also comprises CAMSCO, Creditanstalt’s former

regional IT company which is the specialist for the CEE countries. WAVE Solutions

is responsible for planning the entire system architecture, its further development

and maintenance, and all future-oriented projects ranging from data processing to

points of contact with the customer.

In February 2001, the bringing together of all Org/IT operations was initiated

at HVB Group level to prepare for the implementation of the large variety of

Org/IT tasks in connection with the establishment of a banking network in the CEE

countries and the creation of a supraregional compatible IT structure. All IT activities

will be brought together within “HVB Systems AG”, a company which will be

newly founded. HVB Systems will operate as a kind of holding company and

(besides data processing centres, service providers and start-ups) manage five

business segments: WAVE/System1, Group Control/SAP, Investment Banking, Lead

Competence Real Estate and E-Business Solutions. The business segments are in

each case responsible for the systems assigned to them, both in regard to HVB and

Bank Austria. The reorganisation process is to be concluded by 1 July 2001.

Regular banking operations, e-business and ongoing development projects will

be overseen and managed by Data Austria GmbH and Informations-Technologie

Austria GmbH (IT-Austria). As a cross-sector joint venture with other banks and

savings banks, iT-Austria is responsible for the bank’s mainframe computer centre.

Following Y2K, the “heureka!” project was an important landmark in the year

2000. The project involved the migration of Creditanstalt and Bank Austria to a

uniform data processing system whilst also providing the necessary resources.

Data Austria is the services unit of the Bank Austria Group for new sales

channels. It advises the Bank Austria Group and customers on electronic banking-

related issues and electronic cash management. The company provides ongoing

support for the bank’s e-business services as well as developers for solutions

tailored to meet individual needs in this field. In 2000 a team of 63 persons acting

on behalf of Bank Austria provided advisory services on about 9,000 occasions to

Bank Austria customers. The electronic banking hotline handled 132,000 telephone

calls. Data Austria is also responsible for all of the Group’s call centres, which cover

both in-house and customer services ranging from telephone banking to direct

marketing. For this purpose the call centre activities of the former Bank Austria-

The organisational structure of

information technology services:

WAVE Solutions, the systems house

of Bank Austria …

… IT competence centre for the

Bank of the Regions …

… and service subsidiaries for

day-to-day banking operations,

from accounting entries to the

call centre


103

Teleservice GmbH were integrated within Data Austria, one of the most modern call

centres in Austria. During the year 590,000 calls were handled by the fully

automated system, while customer advisers took care of 677,000 calls.

KSB – the service company of the Bank Austr ia Group

A number of different service units are concentrated in Konzernservice-Betriebe

GmbH. The company’s responsibilities previously covered only human resources and

legal advisory services, but were expanded in the year under review to include

facility management services. These new responsibilities include all Group-relevant

services, from security to telephone services, building maintenance and in-house

services. KSB also operates the bank’s own printing-office and staff canteens, and

manages the Group’s inventory and delivery services. In addition, KSB is responsible

for all the Group’s direct costs of materials.

Staffing levels were reduced by 10% by consolidating various service units in

only one company, KSB, and by harmonising work procedures as a result of this

consolidation process. Spending on office space for the Group, alone, was cut by

some 1 7.3 million in the year under review. In 2001 efforts will focus on expanding

the competence in facility management to include the CEE countries, and to

enlarge the range of products by taking advantage of synergies.

IT solutions: from “heureka!” to System7

2000 was a crucial key year for all service companies, and of course also for

operative business departments and branches. With the crossing over into a new

millennium, the year began with a data processing/IT related challenge. No

problems were encountered either in the bank’s day-to-day operations or by

customers in connection with the Y2K issue as all systems were already in a state

of readiness after thorough testing. Compared with the delicate nature of the

“heureka!” project, this was only a minor exercise. The “Bang” project was realised

on 17 July 2000 with the migration to a uniform IT platform of the Bank Austria

Group. The project was very successful and testifies to the team spirit between

Creditanstalt and Bank Austria, also at branch level. The project volume exceeded

1 200 m (ATS 2.8 bn), 14,000 workstations were newly configured, and 450

systems and 20,000 individual modules were newly developed or converted. This

major project also provided Bank Austria with valuable experience regarding the

coordination of technical and professional project management and change

management with a view to increasing the acceptance rate. The project involved

1,500 employees from throughout the bank, 119 regional change coaches,

Facility management

Europe’s largest data processing

conversion project in the banking sector


146 trainers and 335 instructors. Employees throughout the Group were trained in

33,246 days of training.

A new chapter was opened in 2000 immediately after this project was

concluded: based on the organisational structure described above, all IT units are

participating in the major project for the creation of System1, a supraregional IT

platform for the Bank of the Regions (see text highlighted below). The specific

requirements for Austria will be identified and defined by means of a “gap

analysis” by April 2001. The former CAMSCO, now a part of WAVE, is charged

with the preparations for the introduction of the CORE02 system as a data

processing system for the CEE countries (without Poland).

Inherent in the “Bank of the Regions” concept is the idea of decentralised market penetration and customer service

whilst taking advantage of the benefits afforded by a major international bank. The regional component therefore

relies on a common IT platform. This technology platform of the HVB Group is being prepared under the name

“System3”. “3” stands for euro and the capacity for Europe-wide implementation, supraregional transparency and com-

patibility. These are prerequisites for the efficient settlement of transactions, the development of products through the

mutual exchange of expertise, and for the efficient employment of capital throughout the group. And many future

investments (the familiar “e-terms”: e-commerce, e-banking …) will not be made as an interim solution but, in view of

the critical mass that has been reached, they will involve large amounts (economies of scale). Of the 3 320 m saved

through synergies from the integration of HVB/BA, the IT segment alone accounts for 3 120 m. Merely the standardisa-

tion of the systems used by Bank Austria and Creditanstalt will result in savings of about 3 75 m.

System3 is a multi-dimensional approach, a complex but consistent structure comprising numerous projects. Its pur-

pose is to offer the regional sales units and customers a variety of access channels, and to harmonise the interfaces and

channels used by the bank and by customers, ranging from, for example, the telephone, WAP mobile phone, Internet

broker and self-service terminal to the conventional branch. In addition, System3 will provide support for the entire

range of products offered by a modern, major international bank. All customer-related projects again come together at

the integrated workplace. This represents the basis for personal customer service. The project-oriented introduction of

System3 is a part of the agreed overall strategy for integrating Bank Austria with HVB. The experience gained through

the “heureka!” project and the criteria that have been established on how to proceed provide a good foundation for

this purpose. As a project which involves the entire bank, the architecture is based on the principle “one product – one

process – one system”. It is planned to introduce System3 in Austria in 2003.

Moving into a new dimension with

System5


105

Euro/2: Cash logist ics for Austr ia’s economy

Following the application of its proven strategy which extends beyond individual

divisions and sales units, the bank has appointed a special Group taskforce to

manage phase 2 of the conversion to the euro. A WAVE team is supervising all

measures for the Bank Austria Group which are necessary to ensure the problem-

free introduction of the euro as legal tender on 1 January 2002. A study carried out

in the first half of 2000 to take stock of the available resources involved all Group

divisions and business segments. Aside from the technical aspects of payment

transactions and the necessary conversions by customers, the biggest challenge is

the 1-cash logistics. This involves all measures to ensure the issue of 1-cash in

sufficient quantity and in good time to companies and consumers, as well as the

withdrawal of schilling-denominated banknotes and coins. A total of 340 million

euro-denominated banknotes and 1.5 billion euro-denominated coins have to be

put into circulation in Austria. About 480 million schilling-denominated banknotes

and an estimated 3 billion schilling-denominated coins have to be withdrawn. The

phase leading up to the introduction of the euro will comprise a large-scale

information campaign targeted at employees and customers. Its objective is to

ensure that the changeover-weekend will run as smoothly as the Y2K transition

process. Until then a number of technical and physical problems have to be

overcome.

Only 18 months until the completion of

monetary union


– Irrevocably fixed conversion factors become effective

– Currencies of participating countriesare sub-units of EUR

Time schedule for introduction of euro banknotes and coins

1 Jan. 1999 1 Sept. 2001 1 Oct. 2001 17 Dec. 2001 1 Jan. 2002 28 Feb. 2002

EUR as deposit money

ATS as deposit money

ATS as banknotes and coins

Dual pricing

EUR as banknotes and coins

EUR only

EUR banknotes and coins:advance distribution

to banks (subsequentlyto companies)

Distribution ofEUR starting packages

to individuals (coins)

ATS ceases to be legal tender

Ecological factors are becoming increasingly important with regard to in-house

operations and customer business (credit risk management/environmental rating,

environmental investments, assistance products, consulting on preventative

measures) in terms of production, costs and business objectives. Since the signing

of the United Nations Environmental Program (UNEP) in 1993, Bank Austria has

been actively committed to preventative environmental protection policies, and has

subsequently become a member of Ö.G.U.T. (Austrian Society for Environment and

Technology), B.A.U.M. (Austria-wide Working Group on Environmentally Conscious

Management) and of EVA (Energy Utilisation Agency). Since 1999, the Bank Austria

share has been one of the two Austrian shares contained in the Dow Jones Sustain-

ability Index.

Ecology = Rational Management

106 Ecology

Ecology and economics are not mutually exclusive goals. As the costs of maintaining resources become visible – both

globally and locally – they are no longer considered extraneous economic factors, but rather are becoming important

parameters for rational management (internalisation of social costs). Bank Austria attaches particular importance to

promoting environmental consciousness in Austria, setting the same standards for itself, and providing its customers in

CEE countries with products and advisory services which enable them to successfully deal with environmental risks, and

help them prepare for EU regulations.

In a broader context, the objectives of modern companies are no longer restricted to one-dimensional short-term

thinking. The primary goal of management clearly remains the efficient allocation of capital and generation of the

necessary profits, subject not only to the pressure of the international capital market, but also to the legitimate claims of

subsequent generations. The sharp decline in TMT stocks in 2000 following an unprecedented bull market also made it

clear that optimistic expectations for the future are best realised with well-balanced corporate growth, and that in the

long term, such a strategy also creates a higher value added. Particularly on the threshold of the “knowledge society”,

creativity arising from cultural and social diversity will be a key ingredient of economic success. “Sustainable develop-

ment” requires, at a corporate level, synergies among economic, ecological and social production factors.

107

Ecology management: what we are doing

All of the ecology-related concerns of the Bank Austria Group are handled by

the business ecology management unit created in 1999. Ecology management

oversees the use of working capital and the use of energy based on economic and

ecological feedback control systems. In the year under review, a waste disposal

strategy for twelve Group buildings was among the projects which were success-

fully implemented by the business ecology unit. By focusing on just a few waste

management companies, the unit was able to optimise waste management and

achieve cost savings of up to 10%.

In 2000, projects to reduce the cost of district heating at Creditanstalt’s head

office and the cost of electricity consumed were concluded very successfully, with

cost savings of about 1 0.4 m. At the Bank Austria facility on Lassallestrasse alone,

it was possible to reduce costs by about 20%. The key figures for electricity, water,

waste, paper etc. prepared by the business ecology unit pursuant to VfU standards

(Association for Ecology Management of Financial Institutions) are compared with

international companies (benchmarking) and thus represent an instrument which can

be used to identify potential cost savings and areas where quality and performance

can be improved. Promoting employee awareness via in-house media and organising

events, such as “energy savings week”, are among the unit’s main tasks. The bank

also sponsored ecological projects which included numerous forward-looking,

environmentally-friendly projects designed by young people, students, companies

and institutions. Five years ago the Federal Business Academy/Federal Business

School in Vienna’s 22nd district entered into an environmental partnership with

Bank Austria, and in November 2000 became the first school in Europe to have a

validated environmental statement pursuant to EMAS.

Environmental r isks and opportunit ies

With regard to ecological issues, customers of the Bank Austria Group have a

high level of expertise at their disposal. There are, after all, considerable risks (soil

contamination, toxic emissions etc.) which must be considered in connection with

collateral. Companies and investments are evaluated in light of industry-specific

check lists and outside expertise for creditworthiness and risk management purposes.

For mortgage loans and project financings in the commercial residential construction

sector, potential hidden risks are evaluated and included in the decision-making

process. The bank actively helps customers to comply with environmental require-

ments. Customer advisers at the bank have the necessary tools at their disposal in

an updated form via the bank’s Intranet.

Ecological creditworthiness

and risk factors

Ecology

A start: key figures for the

Bank Austria Group (pursuant to VfU)

Item Unit p.a.

Electricity kWh/employee 5,649

Waste kg/employee 242

Business travel km/employee 1,250

Paper kg/employee 41A4/employee 8,307

Water litres/employee/day 103

Harmonisation of ecological

concerns and cost management

There are only two institutions in Austria that offer “environmental loans”

pursuant to the EU “Growth and Environment” scheme, which are available to

companies employing up to 100 persons. Bank Austria was also the first domestic

bank to offer a global loan to refinance investments in building, plant and machin-

ery, and which is geared to companies employing up to 500 persons.

The environment desk primarily assists small and medium-sized companies to

recognise environmental risks, and provides them with information on the current

legal framework. In addition, Ö.G.U.T. also prepares research and studies on the

environmental situation and on environmental measures needed in CEE countries.

Many CEE countries have already begun to harmonise their laws with EU environ-

mental directives. In view of the complexity of EU law and the resulting need for

substantial investment, Bank Austria has attractive opportunities to market credit

and insurance products.

108 Ecology

DJ WLD Composite IndexFTSE Eurotop 300 Index

DJ Sustainabil ity Index

in %

20001999 2001

–10

0

10

20

30

40

50

60

Structural instruments used by the EU:

ISPA (Instrument for Structural

Policies for Pre-Accession)

PHARE (traffic infrastructure, energy

and environmental projects)

SAPARD (Special Accession Programme for

Agriculture and Rural Development)

Stocks associated with sustainability

keep up well with the general market

trend

109Corporate Communications

In 2000, activities focused on three areas: in Austria efforts were geared to

positioning Bank Austria as the country’s leading banking group in regard to inno-

vation and dynamism.

A further objective of corporate communications was to actively communicate

and take advantage of the Bank Austria Group’s outstanding market position

in Central and Eastern Europe on both a national and international level.

Bank Austria has been informing the general public, through facts and figures, of

the long-term benefits of a higher standard of living that are the result of the inte-

gration of Western and Eastern Europe. The bank does not view the dissemination

of such information as something done purely for its own interest.

Finally, from August, the focus of our work and of public interest was the integration

with HypoVereinsbank. Together with our colleagues at HypoVereinsbank, Bank Austria

corporate communications has had the task of familiarising all other employees, cus-

tomers, the media and investors with this “merger at shareholder level”, and to eliminate

any potential for biased opinions. The problem-free conclusion of the transaction, the

overwhelming number of shareholders that voted in favour of integration, and the high

level of acceptance by the public confirm that corporate communications activities were

successful in achieving their objective and that the strategy convinces all concerned.

Besides these three areas, corporate communications activities also concentrated

on providing sales support. We attached great importance to the consistent imple-

mentation of the two-brand strategy in Austria and on providing accompanying

external and internal information in connection with the conversion of our data

processing systems in the middle of the year. Each of the bank’s project teams also

includes communications experts.

Corporate Communications

Focus on innovative strength and

dynamism, position in CEE countries,

integration with HVB

In view of the rapid pace of change, which requires procedures and the organisational structure to be adapted on an

ongoing basis, internal communications have become an important instrument for the implementation of business strategies.

Group communications, based on the Bank of the Regions concept, faces the challenge of harmonising the regional identity

with the bank’s actual status of a major European bank. A comprehensive correspondent network of communications officers

is currently being established for the purpose of exchanging important information via a graduated media mix, from the staff

journal to the Intranet. This will help employees to get to know one another and contribute toward a team spirit.

Communication via the Internet – a platform without

boundaries

In 2000 the presence of Bank Austria and Creditanstalt in the Internet was

modernised and further improved. A significant feature in this regard is the News-

room, which has been redesigned by the Corporate Communications unit. It offers

information on the Group, contacts within the bank, and provides information on

events and texts of press releases. Its services now include the possibility to access

press releases in the Newsroom of Bank Austria’s homepage whilst these releases

are being issued via fax or e-mail. This particular service has met with an enthusiastic

response. In addition, interested users were also able, via the Internet, to obtain the

latest information on the integration with HVB.

Domestic campaign for strengthening products and brands

In the year 2000, Bank Austria launched two campaigns which focused on

important issues: in the spring the theme was “Bauen und Wohnen”, followed in

the autumn by a large-scale campaign promoting the concept of retirement planning,

both by individuals and at companies, which is becoming increasingly relevant in

today’s world. The attempts to create a broad media mix through extensive use of

the Internet were very successful.

The communications strategy of Creditanstalt in 2000 emphasised continuity.

The successful brand-name campaign “Gedanken zum Erfolg” of 1999 was put on

a broader footing in 2000 with the established slogan “CA, die Bank zum Erfolg”.

Besides the sportsmen and sportswomen from the fields of tennis and golf who

were included in Creditanstalt’s sponsoring plan, this campaign drew on well-

known figures from business and culture to address the public. Altogether, almost

20 topics with successful Austrians from different walks of life helped to associate

the Creditanstalt brand name with the concept of success.

In its strategy for presentations and seminars, Bank Austria is essentially pursuing

two goals: to market its position as the leading bank in Central and Eastern Europe,

and to take a leading role in important issues with future potential such as inno-

vation, e-business and risk capital financing, from the stock exchange to private

equity.

The Bank Austria Europe Forum combined these two objectives in a series of

presentations. Prominent guests and speakers included Austria’s Federal President

Thomas Klestil, the Croatian Minister for Integration Ivan Jacovcic, the Slovak

Republic’s Deputy Prime Minister Ivan Miklos, Slovenia’s Deputy Prime Minister

Marjan Senjur, and Germany’s former Minister for Foreign Affairs Klaus Kinkel.

Open information policy,

with details available on

a real-time basis

Competence in

addressing key issues

Prominent persons propagate

“CA, die Bank zum Erfolg”

Presentations and seminars:

business meets politics,

Bank Austria Europe Forum

110 Corporate Communications

111Corporate Communications

Sponsoring activit ies – from the Kunstforum to the

CA-Trophy

The Bank Austria Group, as one of the country’s most important economic

factors, is also aware of its responsibilities to society. This awareness is reflected in

its many sponsoring activities. Traditionally, the emphasis is on culture, especially on

the fine arts. The Bank Austria Kunstforum thus last year again organised a number

of exhibitions which received international recognition and set a new record for the

number of visitors to this art gallery which is well-known beyond Austria’s borders:

300,000 visitors viewed the widely-acclaimed exhibition “Cézanne, Vollendet –

Unvollendet”, 225,000 guests came to see the Picasso exhibition and 30,000 persons

bought tickets for the anniversary retrospective of Arnulf Rainer. Bank Austria is

setting new standards not only in regard to its art-related strategy, but also in

regard to the manner in which exhibitions are presented. The Cézanne exhibition

was the first time when a presentation was open to the public around the clock for

72 hours.

Bank Austria continued to promote contemporary Austrian art in 2000. For

many years, Bank Austria has been purchasing pictures and offering artists the

possibility to make interesting works accessible to the general public through

exhibitions. By sponsoring numerous prizes, the bank has also drawn attention to

unconventional approaches or styles. The focus on sponsoring activities in the field

of music was continued last year, and included projects which concentrated on the

core region of Central and Eastern Europe. One such example is the International

Trenta Music Forum, a project conducted jointly with the Vienna Philharmonic

Orchestra to help talented young musicians from this region. Another is the

“KunstRaumMitteleuropa” project, involving a series of exhibitions, which was

founded together with Siemens.

Aside from sponsoring art and cultural activities, Bank Austria is also active as

sponsor for sport and social concerns. The bank participates, as need arises, in

numerous smaller but important aid projects such as “Die Möwe”. There are also

fund-raising schemes like “Licht ins Dunkel”, which Bank Austria has been quietly

supporting for many years.

In the area of sport, Bank Austria is particularly committed to sponsoring team

sports with a broad public appeal. Examples are Austria’s record football champions,

Rapid Wien, and the Bank Austria Tour, Austria’s most important cycle race. The

CA-Tennis-Trophy, a tennis tournament which each year attracts many of the

world’s top 10 players to Vienna, is sponsored by Creditanstalt, as is Austria Wien,

Vienna’s other traditional football club.

Sponsoring of art:

exhibitions which attracted

a record number of visitors

Stronger focus on assistance to

talented young people in Austria and

Central and Eastern European countries

Sponsoring of sporting events

with a broad public appeal

“A willingness to change and continuity, while at the same time moving into

new dimensions” is not a meaningless phrase; it describes the concrete field of ten-

sion within which the employees of Bank Austria are working, now more than ever.

This is also reflected in the bank’s personnel-related activities in 2000.

“A willingness to change” is to be seen in the context of the requirements im-

posed by the banking environment in regard to organisation and personnel. New

technology is the pacemaker which is subjecting banking procedures to a process

of fundamental change – a fact that is described in many sections of this report.

The contours of the elementary functions such as customer services and the role as

a production and transaction bank are consequently easier to discern. Therefore the

extent to which Bank Austria reorganised its organisational structure, in-house

processes and information technology in 2000 and in the current year to date was

unprecedented. This was most apparent in Austria with the transition to a uniform

IT platform in the middle of the year (“heureka!” project), which paved the way for

the subsequent new approach in the bank’s retail and corporate customer business.

“Continuity” refers to day-to-day business, the close ties that are maintained

with customers, and the identity of the domestic brand names. The customer ad-

viser serves as the central point of contact for the increasingly large number of

services which are prepared by specialists. The bank actively approaches the

customer as a full service provider. The new definition of the role of branch officers

was accompanied by numerous training measures in Austria.

“Moving into new dimensions” refers to the integration in the HVB Group and

to the accelerated preparations which are under way in the CEE countries. The

acquisition of a majority shareholding in PBK and its merger with Bank Austria in

Poland, and especially the integration of the local Bank Austria and HVB subsidi-

aries that is to take place shortly, have posed new challenges for the Personnel

Division, both in qualitative and quantitative terms. At the end of 2000 almost 50%

of all employees were assigned to positions outside Austria. As progress is made in

eliminating overlap and in integrating the Bank Austria and HVB units, the ratio in

the regions for which Bank Austria is responsible (Austria and CEE) will approach

1:1. On the other hand, the integration in the HVB Group not only requires the

creation of compatible business segment structures and, for example, to jointly take

personnel-related decisions in connection with the integration of business units in

the international financial markets. It also calls for a high degree of coordination

within the matrix comprising divisional and regional units.

Human Resources – Our Most Important Asset

Change management: new processes,

new organisational structure,

greater specialisation in sales,

production and logistics

Continuity: the customer as

the point of reference

New dimensions for personnel

management: corporate responsibility

for Austria and CEE in the HVB Group

Organic interaction in a

matrix organisation

112 Human Resources – Our Most Important Asset

113

Partially decentralised structure and common standards

For the purpose of fulfilling these complex tasks, personnel management follows

a graduated decentralised approach which is based on supraregional strategic prin-

ciples. These guidelines have been established jointly by HVB and Bank Austria and,

aside from setting forth principles, also comprise uniform standards which have to

be implemented in the banks of the regions. The standards for example include

human resources development tools such as the employee performance evaluation

scheme, career role models and training standards, and leadership qualities.

It is self-evident that the strong drive to develop banking business in the CEE

countries, which is led by Bank Austria, also requires supraregional personnel-related

work. In the integration process to date, Bank Austria and HVB have jointly taken

important decisions regarding the appointment of employees at the first and second

management levels to maintain the dynamic pace of the integration process, and to

establish operative structures as quickly as possible. For this purpose they availed

themselves of the temporary project structure at the end of 2000 and at the

beginning of 2001 in order to select the local and supraregional managers in a

cascade system of interviews attended by persons from both banks, with selection

being based purely on merit.

The target structure calls for a CEE personnel department for the subsidiary banks

in Central and Eastern Europe, which will be part of Bank Austria’s Personnel Division.

The department will be responsible for personnel management and personnel devel-

opment. It will focus on continuing to establish quality criteria, with priority being

given to the concept of equal opportunity for all and to creating a team spirit. We are

therefore making a distinction in respect to each unit’s respective starting position –

one needs to take into account the enormous differences in size in the regions – and

we want to take advantage of cultural differences pursuant to the fundamental idea

of the Bank of the Regions. In addition, the size resulting from the combination of the

two banks and the multicultural approach require that most of the operative person-

nel-related work (including administration) be done by the local management.

As the training of employees is arguably the most significant personnel manage-

ment instrument, it is also important to ensure that there is an appropriate balance

between centralised/decentralised training activities. The New Economy is changing

the structure of the financial services sector as it increasingly permeates all areas of

this sector, a fact which has already been mentioned on several occasions in this

report. The volume of information generated by mankind is currently doubling every

four years. Knowledge is becoming a competitive factor in a time of information

overload. The quantitative aspect, in particular, requires the learning process to be

Personnel management in

the Bank Austria regions


2000

consolidated for the first time: Poland / PBK

International

Creditanstalt (sub-group)

Austria

other countries

Bank Austria (sub-group)

Staff numbers*

9,086

27,873

4,021

4,110

10,656

*) consolidated companies; commercial employees based on location; including apprentices andemployees on maternity leave

0

5,000

10,000

15,000

20,000

25,000

30,000

decentralised. This needs to be accompanied by continued central support to ensure

that quality standards are maintained. The bank’s employee training programme is

based on improving the employees’ work-related skills. It thus on the one hand

encourages employees to act on their own initiative and to take responsibility, and

on the other hand seeks to increase the level of knowledge within the organisation.

We are developing an overall management system for the learning process and for

this purpose use the Intranet as a learning platform.

Personnel-related tasks in 2000 and early 2001

In the year under review we restructured various segments within the Bank Aus-

tria Group and spun off a number of units whilst founding new companies. These

developments were most noticeable in the areas of IT and organisation, where we

are moving towards a virtual service company; in the areas of in-house services,

building maintenance and organisation; and amongst the private banking units.

Bank Austria Creditanstalt International (BA/CA-I), the former holding company for

international equity interests, was integrated in Bank Austria. The marketing, prod-

uct development and controlling components of the two-brand strategy that is

pursued in Austria will be strategically managed from 2001.

The bank introduced the ”Job-Börse” to provide efficient support for these

processes and to increase the flexibility of the in-house labour market. This maga-

zine-like instrument, which appears several times a year, publicises attractive posi-

tions within the Bank Austria Group (soon also via the Intranet). Beginning in 2001,

Bank Austria will also publish information on career opportunities in the company,

especially at the subsidiary banks in the CEE countries, via its homepage. This infor-

mation will be available to employees and persons outside the bank.

In line with its long-term goal the Group further reduced the staffing levels of

the three joint-stock companies (by 374 to 13,442 employees), notwithstanding the

integration of Sparkasse Stockerau in Bank Austria AG. Since 1991 staffing levels

have fallen by 22% as a result of normal staff turnover and organisational mea-

sures. There was also an overall decline in the number of employees working in the

companies which are included in the consolidation, if the first-time consolidation

of PBK is not taken into account. The Bank Austria Group employed 27,873 per-

sons at the end of 2000. The net impact of employees integrated in HVB units and

of expected additional HVB staff in CEE subsidiaries will cause staffing levels at the

Bank Austria Group to increase to about 35,000 persons after the appropriate re-

organisation measures have been implemented. About 60% of these employees

will be working in the regions outside Austria.


Learning on the threshold of

the knowledge society:

centralised quality standards

and decentralised information

processing at employees’ own initiative

Personnel Department accompanies

the reorganisation process

“Job-Börse” highlights

individual career opportunities

Personnel statistics

115

Initiative to improve quality through in-house training

The first six months of 2000 were characterised by the Personnel Division’s largest

ever training project. In a period of some 100 days and with the help of 180 trainers,

we trained 5,200 employees at 16 training centres throughout Austria how to operate

the uniform data processing system comprising 35 different programmes. Besides

participating in the training programmes organised by the head office, employees had

the opportunity to practise at their workplace the systems and transactions about

which they had learnt at the seminars. These training units were backed up by training

partnerships which offered Bank Austria employees the opportunity to familiarise them-

selves with the systems’ key functions at the offices of Creditanstalt on a real-time

basis. The ”2000 training year” comprised 50,400 training days and 5,000 seminars.

Bank Austria’s attraction as an employer lies partly in the acknowledged training

opportunities which it offers all employees from the Bank Austria Group aside from

specific project work. In 2000 the role of branch office employees was redefined

according to the new sales strategy. The key issues are automation, faster customer serv-

ice coupled with requirements for an increase in the number of transactions processed,

more flexible hours which permit a greater focus on individual customers, and a

reduction of administrative tasks. In a specially developed programme employees are

trained in how to actively approach customers in the reception areas, how to discard

the ”one man, one desk” concept, and how to always be there to serve the customer.


“Heureka!” training

and change management

Staffing levels 1991-2000(Bank Austria AG + Creditanstalt AG + BA CA International AG)

Headcount, as at 31 December

1991

11,000

12,000

13,000

14,000

15,000

16,000

17,000

18,000

17,170

1992

16,826

1993

16,184

1994

16,144

1995

15,946

1996

15,508

1997

14,827

1998 1999 2000

14,26113,816

13,442

New definitions for

branch-based sales activities

Training in CEE units – a key to success

The training department began training executive personnel in Slovenia, Croatia,

the Czech Republic, Russia and Ukraine in banking and human relations skills from the

summer of 2000. The courses were in each case held in the language of the respective

country. A programme developed for the subsidiary banks in CEE is being implemented

on a decentralised basis in accordance with group-wide quality standards. Of particular

significance in this regard are the training units that focus on loans and on sales. There

are plans for a development programme beginning in 2001, which is aimed at training

employees with leadership potential from subsidiary banks in CEE countries. The pro-

gramme is implemented in cooperation with the Wirtschaftsuniversität Wien, and its

duration and content are similar to a postgraduate MBA course. At a research level, Bank

Austria has created a virtual Internet professorship at the Center of Economic Research

and Graduate Education (CERGE) in Prague. CERGE is one of the most renowned institutes

specialised in training future top managers and executives for industry and public service.

Recruitment and personnel marketing

The training of promising junior staff to qualified executive positions is – in line with

productivity goals – the focus of a future-oriented personnel strategy. Bank Austria’s

personnel marketing activities at universities underline its image as an employer in

Eastern Europe, the market with future potential. An example is the Eastern Europe

master class and Joszef programme. With the slogan ”Young Executives for Eastern

Europe”, and in cooperation with the Wirtschaftsuniversität Wien, we want to attract

high-calibre university graduates in business management who see the CEE countries as

a personal professional challenge and also have a command of the required languages.

In order to establish cross-border contacts with graduates at an early stage, Bank Austria

is offering internships at subsidiary banks in CEE countries, but is also making intern-

ships in Austria available to students from Central and Eastern Europe. Another project

implemented jointly with the Wirtschaftsuniversität Wien is termed “Center of Excel-

lence”. This is a programme which selects the best students who have completed their

first course of studies. These students will in four semesters entrust their further devel-

opment to well-known companies as potential employers. In addition, Bank Austria

proposes specific topics for dissertations or theses for students at Austrian universities.

Management development

In order to increase flexibility and mobility within the company our activities also

focused on management development from 2000. Specific training programmes were

redesigned with the help of external partners (business schools, universities, business

consultancy firms), or they were selected from the international training market. At the

Training initiative for

employees and executives

Bank Austria draws attention to

Europe’s markets with future potential


117

heart of the training programme are the seminar on general management and the

“Banking and Finance” college which were developed in cooperation with the Donau

Universität Krems to meet Bank Austria’s specific needs. With two tiers, namely expertise

and leadership skills, the programme focuses on three target groups: top management,

executives with management potential and promising junior employees/high potentials.

In the first phase beginning in 2001 between seventy-five and eighty employees from

different divisions will participate in this programme at the management trainee and

executive levels. The top management will be offered courses at international business

schools such as INSEAD Fontainebleau and the London Business School. There will

always be a particular focus on the CEE countries. The “high potentials” amongst

promising junior staff will be offered the opportunity to participate in a banking

seminar, in a Bank Austria Banking Cyber School via the Internet, and in the

“Succeed” talent promotion programme. These programmes were organised for Bank

Austria by Finance Trainer International. For select executive staff with management

potential we have planned a “Banking and Finance” college modelled on the lines of

a demanding professional banking cyber school, and a general management seminar.

Values and social competence

The values we believe in will also guide us in our more extensive personnel-related

work. These include transparency, tolerance, openness for ideas and a friendly manner,

as well as a consistent focus on success, and performance-based promotion. Bank Austria

was already considered to be an enterprise with social competence in the early 1990s.

Equal opportunities for all are to be achieved through a greater sense of awareness

and fair access to facilities and training rather than through a rigid system of quotas.

Equality managers at Bank Austria and Creditanstalt support this process of enhancing

awareness. They are committed to creating the appropriate conditions in the day-to-

day office environment (introduction of the “gender approach” in all seminars that

promote human relations skills, mentoring, part-time working opportunities, flexible

working hours, informative events for persons on maternity leave, support for those

returning to the bank, and the company kindergarten that is available to employees).

But “equal opportunities for all” also means making creative use of differences as

factors for success. As the Bank Austria Group will in future also be more active out-

side Austria, it is important to recognise the diversity of norms, mentalities and cultures,

and to take advantage of synergies offered through this diversity. Potential is also to

be found in the interaction between youthful vigour and the wealth of experience of

the older generation. Only a company which is open to all cultures and which takes

account of all stakeholders can be financially successful in the longer term.


Early identification and

promotion of “high potentials”

120 Group reporting in accordance with IAS – Contents

Consolidated Financial StatementsConsolidated income statement for the year ended 31 December 2000 122

Consolidated balance sheet at 31 December 2000 123

Statement of changes in consolidated shareholders’ equity 124

Consolidated cash flow statement of Bank Austria 125

Notes(1) Summary of principal accounting and valuation principles 126

Notes to the consolidatedincome statement

(2) Net interest income 134

(3) Losses on loans and advances 135

(4) Net fee and commission income 135

(5) Net trading result 135

(6) General administrative expenses 136

(7) Result of other operating activities 136

(8) Taxes on income 136

(9) Earnings per share 138

Notes to the consolidatedbalance sheet

(10) Loans and advances to banks and customers 138

(11) Total loan loss provisions 139

(12) Trading assets 140

(13) Other current financial assets 140

(14) Financial fixed assets 140

(15) Intangible assets, property and equipment 141

(16) Other assets 141

(17) Amounts owed to banks and customers 142

(18) Liabilities evidenced by certificates 143

(19) Provisions (including pension provisions) 144

(20) Other liabilities 145

(21) Subordinated capital 145

Additional IAS disclosures(22) Fair values 146

(23) Loans and advances to, and amounts owed to, subsidiaries

and companies in which an equity interest is held 146

(24) Segment reporting 147

(25) Assets on which interest is not being accrued 149

(26) Assets pledged as security 149

(27) Subordinated assets 150

(28) Contingent liabilities and commitments 150

(29) Assets and liabilities in foreign currency 151

(30) Repurchase agreements 151

(31) List of selected equity interests 152

Group Reporting in accordance with IAS Contents

121Group reporting in accordance with IAS – Contents

Risk Report(32) Global risk management 158

(33) Credit risk 166

(34) Financial derivatives 166

Information requiredunder Austrian law

(35) Legal basis under Austrian law 169

(36) Consolidated shareholders’ equity and

shareholders’ equity of Bank Austria AG 170

(37) Employees 171

(38) Information on members of the Managing Board, the Supervisory

Board and the Employees’ Council of Bank Austria AG 171

(39) Trust business contained in local financial statements 172

(40) Breakdown of securities pursuant to the Austrian Banking Act 173

(41) Principal differences between consolidated financial statements

in accordance with IAS and consolidated financial statements

under Austrian generally accepted accounting principles 173

(42) Consolidated capital resources and regulatory capital requirements 176

Concluding Remarks of the Managing Board of Bank Austria 177

Report of the Auditors 178

Report of the Supervisory Board 180

Glossary 184

Quarterly Data for 2000 187

Supervisory Board and Managing Board of Bank Austria Aktiengesellschaft 188

NoteIn this report, “Bank Austria” refers to the Bank Austria Group. To the extent that informationrelates to the separate financial statements of the parent company, “Bank Austria AG” is used.

In adding up rounded figures and calculating the percentage rates of changes, slight differencesmay result compared with totals arrived at by adding up component figures which have not beenrounded.

122 Consolidated financial statements

Consolidated Financial Statements of Bank Austria for 2000

Consolidated income statement for the year ended 31 December 2000

(Notes) 2000 1999 Change5 m 5 m 5 m in %

Interest and similar income 8,670 6,136 2,534 41.3 Interest and similar expenses 6,430 4,102 2,328 56.8

Net interest income (2) 2,240 2,034 206 10.1

Losses on loans and advances (3) 666 400 266 66.5

Fee and commission income 1,118 984 134 13.6 Fee and commission expenses 257 208 49 23.6

Net fee and commission income (4) 862 777 85 11.0

Net trading result (5) 137 187 – 50 – 26.9

General administrative expenses (6) 2,159 2,149 10 0.5

Result of other operating activities (7) 248 138 110 80.5

Extraordinary result – – – –

Net income before taxes 662 587 75 12.8

Taxes on income (8) – 47 – 40 – 7 19.2

Net income after taxes 615 547 68 12.4

Minority interests 23 35 – 12 – 35.0

CONSOLIDATED NET INCOME 592 512 80 15.6

Earnings per share in 5

(9) 2000 1999

Basic earnings per share 5.17 4.45

Diluted earnings per share 5.17 4.45

Appropriation of profit

At the Annual General Meeting, a resolution will be proposed to pay a dividend of 1 1.02 per share out of Bank Austria AG’s net income.

123Consolidated financial statements

Consolidated balance sheet at 31 December 2000

Assets

(Notes) 31 Dec. 2000 31 Dec.1999 Change5 m 5 m 5 m in %

Cash and balances with central banks 1,623 848 776 91.5

Loans and advances to,and placements with, banks (10) 39,417 29,397 10,020 34.1

Loans and advances to customers (10) 82,320 74,648 7,672 10.3

– total loan loss provisions (11) – 2,856 – 2,348 – 508 21.6

Trading assets (12) 14,256 9,982 4,274 42.8

Other current financial assets (13) 3,751 3,301 450 13.6

Financial fixed assets (14) 22,431 19,932 2,499 12.5

Intangible assets (15) 642 710 – 68 – 9.6

Property and equipment (15) 1,248 1,088 160 14.7

Other assets (16) 2,188 2,442 – 255 –10.4

TOTAL ASSETS (29) 165,019 139,999 25,020 17.9


(Notes) 31 Dec. 2000 31 Dec.1999 Change5 m 5 m 5 m in %

Amounts owed to banks (17) 59,105 53,433 5,672 10.6

Amounts owed to customers (17) 53,047 41,885 11,162 26.6

Liabilities evidenced by certificates (18) 31,283 25,926 5,356 20.7

Provisions (19) 2,972 2,862 111 3.9

Other liabilities (20) 8,299 7,588 710 9.4

Subordinated capital (21) 5,030 3,478 1,552 44.6

Minority interests 669 385 284 73.8

Shareholders’ equity 4,615 4,441 174 3.9

TOTAL LIABILITIES ANDSHAREHOLDERS’ EQUITY (29) 165,019 139,999 25,020 17.9

124 Consolidated financial statements

Statement of changes in consolidated shareholders’ equity

5 m Subscribed Capital Retained Totalcapital** reserves** earnings

As at 1 January 1999 847 1,989 1,346 4,182

Consolidated net income 512 512

Dividend payment –117 –117

Currency translation* –139 –139

Other changes 3 3

As at 31 December 1999 847 1,989 1,605 4,441

5 m Subscribed Capital Retained Totalcapital** reserves** earnings

As at 1 January 2000 847 1,989 1,605 4,441

Consolidated net income 592 592

Dividend payment –114 –114

Currency translation* –101 –101

Conversion and redemption of participation certificates –8 –9 –23 –40

Share buyback –10 10 –74 –74

Spin-off into Bank Austria Holding AG 182 –199 –17

Other changes –72 –72

As at 31 December 2000 829 2,172 1,614 4,615

*) including rate hedging costs associated with net investment in foreign entities**) subscribed capital and capital reserves as shown in the separate financial statements of Bank Austria AG

125Consolidated financial statements

5 m 2000 1999

NET INCOME 615 547

Non-cash items included in net income, and adjustments toreconcile net income to cash flows from operating activities

Depreciation, amortisation, write-downs and write-ups 1,072 671Increase in staff-related provisions and other provisions 185 299Decrease in other non-cash items – 114 – 204Gains/losses on disposals of intangible assets,property and equipment, and financial fixed assets – 387 – 132

SUB-TOTAL 1,371 1,182

Increase/decrease in operating assets and liabilitiesafter adjustment for non-cash components

Trading assets – 4,162 – 577Loans and advances to banks and customers – 13,543 – 8,812Other assets 82 – 903Amounts owed to banks and customers 10,629 10,762Liabilities evidenced by certificates 6,111 4,496Other liabilities 370 – 645

CASH FLOWS FROM OPERATING ACTIVITIES 858 5,503

Proceeds from disposal offinancial fixed assets 6,328 2,534property and equipment 195 60

Payments for purchases of financial fixed assets – 7,670 – 7,322property and equipment – 320 – 410

Effects of changes in the group of consolidated companies 274 –

Other changes – 124 – 206

CASH FLOWS FROM INVESTING ACTIVITIES – 1,317 – 5,343

Proceeds from conversion of participation certificates 4 –

Share buyback, redemption of participation certificates, dividends paid – 232 – 117

Subordinated liabilities and other financing activities 1,464 – 82

CASH FLOWS FROM FINANCING ACTIVITIES 1,236 – 199

CASH AND CASH EQUIVALENTS AT END OF PREVIOUS PERIOD 848 895

Cash flows from operating activities 858 5,503Cash flows from investing activities – 1,317 – 5,343Cash flows from financing activities 1,236 – 199Effects of exchange rate changes – 2 – 8

CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,623 848

PAYMENTS FOR TAXES, INTEREST AND DIVIDENDS

Income taxes paid 41 1Interest received 7,591 5,740Interest paid – 5,829 – 4,115Dividends received 240 151

Consolidated cash flow statement of Bank Austria

(1) Summary of principal accounting and valuation principles

The 2000 consolidated financial statements of Bank Austria have been prepared in accord-

ance with International Accounting Standards (IAS). The superordinate credit institution

pursuant to Section 30 of the Austrian Banking Act is the former Sparkasse Stockerau AG,

Stockerau, whose name has in the meantime been changed to Bank Austria AG, Vienna. As

part of the structural changes in the Group which took place at the end of 2000 and resulted

from the integration with Bayerische Hypo- und Vereinsbank AG, Munich, (hereinafter

referred to as HypoVereinsbank or HVB), Sparkasse Stockerau took over substantially all of the

previous operations of the Bank Austria Group.

Unless indicated otherwise, all financial data are in millions of euros (1).

All IASs published by the IASC as International Accounting Standards 2000, except the

standards IAS 39 and IAS 40, both of which are effective from 1 January 2001, have been

applied in preparing these consolidated financial statements. The comparative figures for the

previous year are also based on these standards.

Interpretations SIC 1 to SIC 16 issued by the Standing Interpretations Committee (SIC) have

also been taken into account.

The consolidated financial statements of Bank Austria presented in accordance with IAS in

this annual report are based on the separate financial statements of all consolidated companies,

which have been prepared in accordance with IAS on a uniform Group-wide basis. The local

financial statements of associated companies accounted for under the equity method have been

used unchanged, which has no material effects on the consolidated financial statements.

On the basis of the new ownership structure and the resulting integration into the HVB

Group, minority interests in non-financial companies are no longer valued at equity because no

significant influence is deemed to exist on the basis of the view of German banks now applied

across the Group. The materiality limit has also been adjusted to the HVB Group standard.

Material differences between IAS rules and Austrian generally accepted accounting princi-

ples in reporting specific items of the balance sheet and the income statement are explained

in the notes to the relevant items or in the description of the principal differences between

consolidated financial statements in accordance with IAS and consolidated financial state-

ments under Austrian generally accepted accounting principles on page 173 and subsequent

pages of this annual report.

Balance sheet values denominated in foreign currencies are translated at the mean spot

exchange rate, and forward foreign exchange transactions at the mean forward rate prevailing

at the balance sheet date.

Financial statements of foreign operations in foreign currency are translated into euro at

the spot exchange rate at the balance sheet date (closing rate method).

126 Notes

Notes to the Consolidated Financial Statements of Bank Austria

IASs applied

Foreign currency translation

127Notes

In the reporting year, rate hedging was performed for the net investment in and results of

foreign Group members.

Rate hedging transactions are valued together with the underlying on-balance sheet

transaction.

All companies that are material and are directly or indirectly controlled by Bank Austria AG

have been consolidated in the consolidated financial statements.

Equity interests in associated financial companies which are material, i.e. companies which

are not indirectly or directly controlled by Bank Austria AG but in which it can exercise a

significant influence, are accounted for under the equity method.

Interests in all other companies are valued at cost. In the case of a permanent impairment,

a write-down is made which is reversed when the circumstances that led to such write-down

cease to exist.

The method of inclusion in the consolidated financial statements can be derived from the

list of significant equity interests given in note 31.

The shares in Lenzing AG were held with a view to disposal already at the time when Bank

Austria AG acquired Creditanstalt AG. Therefore Lenzing AG has been excluded from con-

solidation. At the beginning of 2001, subject to approval by the competent cartel authorities,

this subsidiary was sold.

The Group holds a majority interest in Informations-Technologie Austria Ges.m.b.H.,

Vienna. As a result of agreements with shareholders outside the Group, the company is not

controlled by Bank Austria AG and is therefore not a Group member.

RINGTURM Kapitalanlagegesellschaft m.b.H., Vienna, in which a minority interest is held,

is a controlled company on the basis of agreements and has thus been consolidated.

Compared with the group of companies consolidated in the 1999 consolidated financial

statements of Bank Austria, there have been the following changes:

As part of the integration of Bank Austria AG and HVB, Creditanstalt AG, Vienna, was

transferred to Sparkasse Stockerau Aktiengesellschaft, Stockerau. Bank Austria Creditanstalt Inter-

national AG, Vienna, was merged with Bank Austria AG, Vienna, and the banking business of

Bank Austria AG, Vienna, was spun off into Sparkasse Stockerau AG, and the name of the listed

company Bank Austria AG, Vienna, was changed to Bank Austria Holding AG, Vienna. Sparkasse

Stockerau AG, whose name was changed to Bank Austria AG, Vienna, comprises substantially all

of the assets and liabilities of the former Bank Austria AG with the exception of the interest in

Bank Austria Commercial Paper Inc., New York, which took over Bank Austria AG’s international

branch in Greenwich, USA, and continued to be held by BA Holding AG, Vienna – a company

that existed until it merged with HVB in January 2001 – and has thus been excluded from

consolidation in the consolidated financial statements of Bank Austria.

a) Consolidated companies

Consolidated companies

and consolidation methods

128 Notes

BA Industrieholding GmbH, Vienna, has been excluded from consolidation following its

transfer, against the granting of profit-sharing rights, to a private foundation which is inde-

pendent of Bank Austria.

Diners Club Austria AG, Vienna, has transferred its credit card business to “AirPlus” Air

Travel Card Vertriebsgesellschaft, Vienna, and has been excluded from consolidation because

it no longer meets the materiality criterion.

The following companies have been excluded from consolidation because they are not

material to the consolidated financial statements:

– BANK AUSTRIA Securities, Inc., New York,

– Bank Austria Creditanstalt (Singapore) Ltd., Singapore,

– GANYMED Immobilienvermietungsgesellschaft m.b.H., Vienna, and

– HYPERION Immobilienvermietungsgesellschaft m.b.H., Vienna.

Control of Powszechny Bank Kredytowy S.A. (PBK), Warsaw, was assumed towards the end

of 2000. Therefore the company has been consolidated, together with a material subsidiary,

Gornoslaski Bank Gospodarczy SA, Katowice, for the first time in the consolidated financial

statements as at 31 December 2000 presented in this annual report. The purchase price for

the additional 10.29% interest amounted to 1 81 m. As part of this acquisition, Bank Austria

Creditanstalt Poland S.A., Warsaw, was merged into PBK.

The following table shows the balance sheet of the PBK Group as contained in the

consolidated financial statements of Bank Austria:

5 m Addition of PBK Group

Cash and balances with central banks 355Loans and advances to, and placements with, banks 1,116Loans and advances to customers 3,355– total loan loss provisions –231Trading assets 81Other current financial assets 526Financial fixed assets 514Intangible assets 58Property and equipment 181Other assets 188

TOTAL ASSETS 6,143

5 m Addition of PBK Group

Amounts owed to banks 658Amounts owed to customers 4,780Liabilities evidenced by certificates 12Provisions 15Other liabilities 368Subordinated capital 1Minority interests 288Shareholders’ equity 21

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 6,143

129Notes

b) Companies valued at equity

As part of the sale of ÖRAG Österreichische Realitäten AG, Vienna, real estate used for

banking operations was transferred to CA Betriebsobjekte AG, Vienna. Therefore this

company has been consolidated.

EB und HYPO-BANK BURGENLAND Aktiengesellschaft, Eisenstadt; Semperit AG Holding,

Vienna; Wienerberger Baustoffindustrie AG, Vienna; and Informations-Technologie Austria

GmbH, Vienna, have been excluded from the group of companies accounted for under the

equity method either because they were sold or no significant influence in them exists or

because they are not material to the consolidated financial statements presented in this

annual report. Like interests in all other companies, interests in these companies are reflected

in the consolidated balance sheet at their book values; dividends received from these

companies are recognised in the consolidated income statement.

Effect of changes in the group of consol idated companies

Assets5 m Companies which Companies no longer 31 Dec. 1999

were no longer accounted for under restated31 Dec. 1999 consolidated the equity method figures

Cash and balances with central banks 848 – 1 847

Loans and advances to, and placements with, banks 29,397 42 29,438

Loans and advances to customers 74,648 – 70 74,578

– total loan loss provisions – 2,348 4 –2,344

Trading assets 9,982 9,982

Other current financial assets 3,301 3,301

Financial fixed assets 19,932 108 98 20,138

Intangible assets 710 – 3 – 141 566

Property and equipment 1,088 – 133 956

Other assets 2,442 1 2,443

TOTAL ASSETS 139,999 – 53 – 42 139,904

Liabilities and shareholders’ equity5 m Companies which Companies no longer 31 Dec. 1999

were no longer accounted for under restated31 Dec. 1999 consolidated the equity method figures

Amounts owed to banks 53,433 1 53,434

Amounts owed to customers 41,885 905 42,790

Liabilities evidenced by certificates 25,926 – 939 24,987

Provisions 2,862 – 4 2,858

Other liabilities 7,588 – 8 7,580

Subordinated capital 3,478 – 3 3,475

Minority interests 385 – 2 383

Shareholders’ equity 4,441 – 3 – 42 4,396

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 139,999 – 53 – 42 139,904

In the annual report, the previous year’s figures are not restated.

130 Notes

For the purpose of capital consolidation, the Group’s cost of acquisition of a subsidiary is

offset against the share of equity acquired in the newly consolidated company. Differences

arising are allocated to the subsidiary’s assets up to their fair value. Any differences remaining

after such allocation are recognised in the balance sheet as goodwill and amortised over their

estimated economic lives on a straight-line basis over a period of 15 to 20 years. The charge

for amortisation of goodwill is reflected in the result of other operating activities.

For all equity interests acquired after 1 January 1995, goodwill has been calculated using

the method described above, recognised as an asset and amortised. Goodwill arising on

acquisitions before that date has been offset against retained earnings in accordance with IAS 22.

The capital of foreign subsidiaries has been translated using the exchange rate at the date

of acquisition. Gains and losses arising on the translation of shareholders’ equity are offset

against retained earnings. The effect is shown in the statement of changes in consolidated

shareholders’ equity.

Intragroup receivables, liabilities, expenses and income are eliminated unless they are of

minor significance. Intragroup profits are also eliminated.

As a lessor, we recognise the present value of future payments under a finance lease as a

receivable stated as loans and advances. In the case of operating leases, the relevant assets

are included in property and equipment.

Capital consolidation

Consolidation procedures

Leasing

Effect of changes in the group of consol idated companies

5 m Companies which Companies no longer 1999were no longer accounted for under restated

1999 consolidated the equity method figures

Net interest income 2,034 2 – 23 2,013

Losses on loans and advances 400 –1 – 399

Net fee and commission income 777 –14 – 763

Trading result 187 – – 187

General administrative expenses 2,149 – 6 – 2,143

Result of other operating activities 138 4 – 142

Extraordinary result – – – –

Net income before taxes 587 –1 –23 563

Taxes on income – 40 – – – 40

Net income after taxes 547 –1 – 546

Minority interests 35 – – 35

CONSOLIDATED NET INCOME 512 –1 –23 488

In the annual report, the previous year’s figures are not restated.

Loans and advances are carried in the balance sheet at their gross amounts, i.e. before

deduction of provisions, including accrued interest. Interest is accrued only to the extent that

interest is expected to be received.

The item “total loan loss provisions” shows the total amount of provisions made for losses

on loans and advances in the form of specific provisions (including flat-rate specific provisions).

Provisions for off-balance sheet transactions are recognised as provisions on the liabilities side of

the balance sheet. Loan loss provisions are made on the basis of estimates of future loan losses.

Trading assets are recognised at their fair values. To determine fair value, market prices

and market-related valuations (Bloomberg, Reuters, Telerate, ...) are used. Where such prices

or valuations are not available, internal prices based on present value calculations or option

pricing models are applied.

Netting is performed only to the extent that there is an enforceable netting right and this

reflects the actually expected future cash flows under the transaction.

The assets included in this item are neither held for trading nor intended for continuing

use within the Group. They are carried at the lower of cost and market value. Any write-ups

are only made up to the amount of (amortised) cost.

Financial fixed assets are intended for continuing use within the Group. Such assets – with

the exception of companies accounted for under the equity method – are carried at cost and

write-downs are made for other than temporary impairments. When the circumstances that

led to a write-down cease to exist, a write-up is made up to the amount of (amortised) cost.

Differences between cost and the amount repayable are recognised through write-ups or

write-downs spread over the period to maturity.

Property and equipment as well as intangible assets are carried at cost less depreciation and/or

amortisation. Any impairments that are expected to persist lead to a special write-down. When

the circumstances that led to such a write-down cease to exist, an appropriate write-up is made.

Assets are depreciated on a straight-line basis over their estimated useful lives. At Bank

Austria, depreciation and amortisation is calculated on the basis of the following average

useful lives of property and equipment and intangible assets:

– buildings used for banking operations: 25 – 40 years

– buildings not used for banking operations: 50 years

– office furniture and equipment: 4 – 15 years

– software: 4 – 6 years

– goodwill: 15 – 20 years.

131Notes

Loans and advances

Total loan loss provisions

Trading assets

Other current financial assets

Intangible assets,

property and equipment

Financial fixed assets

132 Notes

The principal components of this item are receivables not relating to the banking business

(mainly accounts receivable from deliveries of goods and the performance of services), tax

claims and deferred tax assets.

Taxes on income are recognised and calculated in accordance with IAS 12 under the

balance sheet-oriented liability tax allocation method. At any taxable entity, the calculation

is based on the tax rates that are expected to apply to the period in which the deferred tax

asset or liability will reverse.

Deferred tax assets and liabilities are calculated on the basis of the difference between the

carrying amount of an asset or a liability recognised in the balance sheet and its respective

tax base. This will probably increase or decrease the income tax charge in the future

(temporary differences). Deferred tax assets are recognised for tax losses carried forward if it

is probable that future taxable profits will be available at the same taxable entity. Deferred

tax assets and liabilities are not discounted.

The tax expense included in the determination of net income is recognised in the item

“taxes on income” in the consolidated income statement. In the notes, tax expense is broken

down into current and deferred income tax expense. Taxes other than those on income are

included in the item “result of other operating activities”.

All liabilities are stated at the nominal amounts.

In the case of liabilities evidenced by certificates, any difference between the issue price

and the amount repayable is treated as a write-up or write-down spread over the period to

maturity.

The appropriation of profits proposed at the Annual General Meeting is not reflected in

the bank’s liabilities because the amount of the distribution will be determined by resolution

passed at the Annual General Meeting.

A provision is recognised only if there is a legal or constructive obligation towards a third

party outside the Group and a reliable estimate can be made of the amount of the obligation.

Provisions for / obligations arising from post-employment benefits and termination

benefits

Provisions for post-employment benefits and termination benefits are recognised in

accordance with the rules contained in IAS 19.

If rights to benefits are secured by defined-contribution plans, in particular future pension

benefits, no provisions are permitted to be made. Payments agreed to be made to a pension

fund for defined-contribution plans are recognised as an expense in the current period. There

are no obligations going beyond that.

Liabilities

Provisions

Other assets

Deferred taxes

133Notes

Under a commitment to provide defined benefits, Bank Austria continues to recognise a

pension provision for the rights of retired employees and – as a special feature of Bank Austria

AG’s staff regulations – for the future benefits, equivalent to those under mandatory insurance,

earned by active employees for whom Bank Austria AG has assumed the obligations of the

mandatory pension insurance scheme pursuant to Section 5 of the Austrian General Social

Insurance Act (ASVG). Disability risk as determined remains covered by the provision,

allowance being made for benefits from the pension funds.

The pension obligations arising from commitments made by Group companies and existing

at the balance sheet date were determined – with due regard to existing internal service

regulations within the companies – on the basis of the following actuarial assumptions:

– discount rate: 6%

– salary increases under collective bargaining agreements: 2% p.a.

– career trends: 0.25% – 0.5% p.a.

– AVÖ 1999-P statistical tables (for salaried staff)

– no changes compared with the previous year.

This item includes in particular negative market values on derivative financial instruments

held in the trading portfolio.

The revaluation method is used to determine the amount of minority interests. The

calculation is based on the figures in the local financial statements prepared on an IAS basis.

Shareholders’ equity is composed of paid-in capital, i.e. capital made available to the com-

pany by shareholders (subscribed capital plus capital reserves), and earned capital (revenue

reserves, reserves pursuant to Section 23 (6) of the Austrian Banking Act, reserves for own

shares, revaluation reserve, net income; excluding distributions in previous periods).

Interest and similar income is accrued as long as a loan is expected to be recoverable.

Income mainly received as payment for the use of capital (usually calculated, like interest, on

the basis of a specific term or on the amount receivable) is included in income similar to

interest. Income from equity interests and from property rented to third parties is also included

in this item.

The same principles apply to the recognition of interest and similar expenses.

Other liabilities

Minority interests

Shareholders’ equity

Net interest income

134 Notes to the consolidated income statement

This item includes direct write-offs, provisions for losses on loans and advances, and

income from the release of loan loss provisions as well as recoveries of loans and advances

previously written off.

Net fee and commission income comprises income from services provided by the Group

against fees and commissions as well as expenses incurred for services provided by third

parties and related to the Group’s fee-earning business.

The net trading result shows the realised results from trading activities and the results from

the valuation of trading positions using the mark-to-market method.

The result of other operating activities includes the net results from sales and valuation of

current financial assets and financial fixed assets. Also included in this item are taxes not

dependent on income, amortisation of goodwill as well as expenses and income not to be

reported in other income or expense items.

Notes to the consol idated income statement

5 m 2000 1999

Interest income from loans and advances to banks and customers 6,091 4,380

Interest income from bonds and other fixed-income securities 1,930 1,230

Interest income from leasing transactions 193 145

Share of net income of companies accounted for under the equity method 177 216

Other income similar to interest 279 164

INTEREST AND SIMILAR INCOME 8,670 6,136

Interest expenses for amounts owed to banks and customers 4,601 2,800

Interest expenses for liabilities evidenced by certificates 1,809 1,282

Other expenses similar to interest 20 20

INTEREST AND SIMILAR EXPENSES 6,430 4,102

NET INTEREST INCOME 2,240 2,034

The general increase in interest income and interest expenses resulted primarily from

volume increases and changes in interest rates.

The changes in the group of consolidated companies presented above accounted for

1 23 m of the decline in the share of net income of companies accounted for under the

equity method.

Other income similar to interest includes special dividends in connection with sales of

equity interests in the amount of 1 168 m.

Losses on loans and advances

Net fee and commission income

Net trading result

Result of other

operating activities

(2) Net interest income

5 m 2000 1999

Direct write-offs of,and provisions for, loans and advances to banks and customers 991 700

Release of provisions for loans and advances to banks and customers –249 –220

Recoveries of loans and advances previously written off –76 –64

Net charge for losses on loansand advances on the balance sheet 666 416

Allocation to provisions for contingent liabilities and commitments 46 37

Release of provisions for contingent liabilities and commitments –44 –54

Net charge for provisionsfor off-balance sheet credit transactions 2 –16

NET CHARGE FOR LOSSES ON LOANS AND ADVANCES* 666 400

*) for details see Risk Report, note 32 and subsequent notes

5 m 2000 1999

Payment transactions 272 273

Lending business 126 91

Securities business 273 203

Foreign exchange, foreign notes and coin, and precious metals transactions 134 129

Other services and advisory business 56 81

NET FEE AND COMMISSION INCOME 862 777

5 m 2000 1999

Equity-related transactions 4 81

Exchange rate-related transactions 95 81

Interest rate-related transactions 38 24

NET TRADING RESULT 137 187

The net trading result from equity-related transactions includes realised and unrealised

amounts from marking to market, as well as dividend income and funding costs related to

equity securities held for trading. Accrued interest and funding costs related to other trading

assets are recognised in net interest income.

135Notes to the consolidated income statement

(3) Losses on loans

and advances

(4) Net fee and

commission income

(5) Net trading result

136 Notes to the consolidated income statement

5 m 2000 1999

Wages and salaries 842 770

Statutory social-security contributions 167 160

Other employee benefits 25 27

Expenses for retirement benefits 88 123

Allocation to the provision for severance paymentsand to the pension provision 119 126

Staff costs 1,242 1,206

Other administrative expenses 782 800

Depreciation of property and equipmentand amortisation of intangible assets 135 143

GENERAL ADMINISTRATIVE EXPENSES 2,159 2,149

Amortisation of goodwill which is included in intangible assets is reflected in the result of

other operating activities.

5 m 2000 1999

Other operating income 103 104

Other operating expenses 160 149

Amortisation of goodwill 30 30

Results from other current financial assets 71 42

Results from financial fixed assets 263 170

RESULT OF OTHER OPERATING ACTIVITIES 248 138

Other operating income and other operating expenses include items which are not to be

recognised in other income or expense items.

Business activities in rescheduled debt resulted in a profit of 1 50 m (1999: 1 49 m), which

is contained in the results from other current financial assets.

The results from financial fixed assets included a profit of 1 194 m from the transfer of

equity interests in non-financial companies to a subsidiary of a private foundation independent

of Bank Austria against the granting of profit participation rights pursuant to Section 174 (3) of

the Austrian Joint Stock Companies Act. In a similar transaction in the previous year, the

disposal of real estate not required for business operations resulted in a profit of 1 165 m.

About 1 83 m was realised from sales of other equity interests.

5 m 2000 1999

Current income tax expense 41 1of which: abroad 17 – 8of which: Austria 24 9

Deferred income tax expense (+) / income (–) 6 38

Reported taxes on income 47 40

(6) General administrative

expenses

(7) Result of other

operating activities

(8) Taxes on income

137Notes to the consolidated income statement

The following is a reconciliation between computed tax expense and reported tax expense:

5 m 2000 1999

Net income before taxes 662 587

Computed tax expense (34%) 225 199

Tax arising from non-deductible expenses 7 14

Tax saving at foreign tax rates – 28 – 4

Tax saving on tax-exempt income from equity interests – 81 – 49

Tax saving on other tax-exempt income – 58 – 19

Tax saving on net income from companiesaccounted for under the equity method – 43 – 55

Tax arising from non-deductible amortisation of goodwill 16 10

Tax saving on write-downs of equity interests – – 17

Tax saving on investment incentives – 11 – 6

Tax credits from previous years – 8 – 22

Changes in the extent to which foreign tax losses carried forwardcan be utilised 30 – 17

Other tax effects – 2 5

Reported tax expense 47 40

In the financial year, no income taxes arose in connection with extraordinary transactions.

As a result of the acquisition of companies, the exclusion of companies from consolidation

and changes in exchange rates used for currency translation, the change in deferred taxes

does not correspond to the expense.

The assets include deferred tax assets arising from the carryforward of unused tax losses

in the amount of 1 212 m (1999: 1 137 m). Most of the tax losses carried forward can be

carried forward without restriction.

In respect of tax losses carried forward in the amount of 1 663 m (1999: 1 612 m), no

deferred tax asset was recognised because, from a current perspective, a tax benefit will

probably not be realisable within a reasonable period. Information in future business years

may require an adjustment to deferred tax assets.

138 Notes to the consolidated balance sheet

2000 1999

Number of shares as at 31 December 114,000,000 114,525,588

Average number of shares outstanding 114,443,296 114,525,588

Consolidated net income in v (adjusted) 591,809.000 509,971,000

Basic earnings per share in v 5.17 4.45

Diluted earnings per share in v 5.17 4.45

Own shares held as part of the trading portfolio were used for Bank Austria’s activities as

market maker to protect the Vienna Stock Exchange’s ability to function. Therefore these

shares continued to be regarded by Bank Austria as being in the market and were thus

included in the number of shares outstanding.

During the reporting period, no financial instruments were outstanding which could have

a dilutive effect on the ordinary shares. Therefore basic earnings per share are equal to

diluted earnings per share.

Notes to the consol idated balance sheetWhen comparing balance sheet figures, the reader should always bear in mind the change

in the group of consolidated companies resulting from the acquisition of PBK (the effect of

the change is presented in note 1, change in the group of consolidated companies).

Breakdown by product

5 m 2000 1999

Money market placements with banks 30,275 22,115

Loans to banks 3,636 3,701

Mortgage loans 4,356 4,592

Loans to local authorities 5,366 2,237

Leasing receivables 2,844 3,108

Export loans 8,300 8,277

Other loans and advances 66,960 60,015

LOANS AND ADVANCES TO BANKS AND CUSTOMERS 121,737 104,044

Loans and advances to banks and customers by region

5 m 2000 1999

Austria 56,811 53,147

Abroad 64,926 50,897

of which: Central and Eastern Europe 13,134 7,293

of which: North America 14,135 11,312

TOTAL 121,737 104,044

(9) Earnings per share

(10) Loans and advances to

banks and customers

Information on leasing business

5 m 2000 1999

Total gross investment 3,803 3,579

Unearned finance income –959 –819

Total net investment 2,844 2,760

Unguaranteed residual values 989 965

New leasing business developed as follows:

5 m 2000 1999

Austrian leasing business 695 667Real estate 396 288Equipment 299 379

International leasing business 179 67

5 m For loans and advances to, For loans and advances Totaland placements with, banks to customers

2000 1999 2000 1999 2000 1999

At beginning of reporting year 74 336 2,274 2,279 2,349 2,615

Exchange differences andother changes not reflected inthe income statement –24 8 287 40 263 48

Allocation 13 17 977 583 990 600

Release –8 –80 –241 –140 –249 –220

Utilisation –8 –184 –497 –506 –504 –690

Transfer – –24 8 18 8 –6

At end of reporting year 48 74 2,808 2,274 2,856 2,348

5 m 2000 1999

Total loan loss provisions as at 31 December 2,856 2,348of which: Austria 2,167 1,863of which: abroad 689 485of which: Central and Eastern Europe 384 178of which: North America 96 16

139Notes to the consolidated balance sheet

(11) Total loan

loss provisions

Breakdown by remaining maturity

5 m Repayable Up to 3 months 1 year Over Totalon demand 3 months to 1 year to 5 years 5 years

Loans and advances to, and placements with, banks 1,009 18,246 14,410 2,913 2,839 39,417

Loans and advances to customers 10,694 8,789 8,178 18,373 36,286 82,320

LOANS AND ADVANCES TOBANKS AND CUSTOMERS – 2000 11,704 27,035 22,588 21,286 39,124 121,737

Loans and advances to, and placements with, banks 1,076 14,235 8,397 3,047 2,643 29,397

Loans and advances to customers 8,979 11,346 9,266 20,074 24,982 74,648

LOANS AND ADVANCES TOBANKS AND CUSTOMERS – 1999 10,055 25,580 17,663 23,121 27,625 104,044


5 m 2000 1999

Bonds and other fixed-income securities 7,217 4,472of which: bonds and other debt securities issued by public borrowers 1,987 389of which: bonds and other debt securities issued by other borrowers 5,118 4,055of which: own debt securities 112 28

Shares and other variable-yield securities 1,209 322of which: shares 897 278of which: investment certificates 293 32of which: other variable-yield securities 19 12

Positive market values on derivative financial instruments 5,496 4,983of which: equity derivatives 53 52of which: exchange rate derivatives 1,424 1,530of which: interest rate derivatives 4,019 3,402

Other trading assets 334 35

Own shares – 169

TRADING ASSETS 14,256 9,982

5 m 2000 1999

Bonds and other fixed-income securities 2,047 1,371of which: bonds and other debt securities issued by public borrowers 1,544 821of which: bonds and other debt securities issued by other borrowers 347 266of which: own debt securities 155 284

Shares and other variable-yield securities 1,704 1,929of which: shares 440 510of which: investment certificates 1,107 1,235of which: other variable-yield securities 157 185

OTHER CURRENT FINANCIAL ASSETS 3,751 3,301

5 m 2000 1999

Bonds and other fixed-income securities 18,038 15,019of which: bonds and other debt securities issued by public borrowers 7,758 7,244of which: bonds and other debt securities issued by other borrowers 10,280 7,774

Shares and other variable-yield securities 1,393 1,610of which: shares 54 39of which: investment certificates 34 693of which: other variable-yield securities 1,304 879

Equity interests 1,447 1,866of which: accounted for under the equity method 957 1,270

Shares in unconsolidated subsidiaries 1,161 983of which: accounted for under the equity method 34 29

Land and buildings rented to third parties 393 454

FINANCIAL FIXED ASSETS 22,431 19,932

(12) Trading assets

(13) Other current

financial assets

(14) Financial fixed assets


5 m 2000 1999

Goodwill 455 525

Other intangible assets 187 185

INTANGIBLE ASSETS 642 710

The reduction of goodwill results mainly from companies no longer accounted for under

the equity method (minus 1 141 m), which exceeded additions resulting from the acquisition

of new companies.

5 m 2000 1999

Land and buildings used for banking operations 577 553

Other land and buildings 133 111

Other property and equipment 538 424

PROPERTY AND EQUIPMENT 1,248 1,088

5 m 2000 1999

Other receivables 695 653

Other assets 748 1,212

Deferred tax asset (net) 502 465

Prepaid expenses 243 112

OTHER ASSETS 2,188 2,442

(15) Intangible assets,

property and equipment

(16) Other assets

Movements in financial fixed assets

5 m Carrying Acquisition Changes in group Additions Disposals Accumulated Carrying Write-ups (+)/write-downsvalue cost * of consolidated incl. reclassi- incl. reclassi- depreciation value and depreciation (–)

31 Dec.1999 1 Jan. 2000 companies fications fications 31 Dec. 2000 in the financial year

Financial fixed assets 19,932 20,945 692 7,453 –6,296 –364 22,431 25

Bonds and other fixed-income securities 15,019 15,491 695 6,533 –4,387 –294 18,038 7

Shares 1,610 1,625 8 519 –758 –2 1,393 –0

Equity interests** 1,866 1,988 –252 151 –611 171 1,447 126

Shares in subsidiaries 983 1,284 241 236 –497 –103 1,161 –87

Properties rented to third parties 454 556 – 15 –43 –135 393 –21

*) including exchange differences of 1 437 m / **) write-downs/write-ups include changes resulting from valuation at equity

Movements in intangible assets and in property and equipment

5 m Carrying Acquisition Changes in group Additions Disposals Accumulated Carrying Write-ups (+)/write-downsvalue cost * of consolidated incl. reclassi- incl. reclassi- depreciation value and depreciation (–)

31 Dec.1999 1 Jan. 2000 companies fications fications 31 Dec. 2000 in the financial year

Intangible assets 710 924 –24 93 –60 –291 642 – 55

Property and equipment 1,088 1,861 235 227 –213 –862 1,248 – 115

*) including exchange differences of 1 3 m


5 m 2000 1999

Deferred tax assets 290 328

Recognised benefitsfrom unused tax losses carried forward 212 137

DEFERRED TAX ASSET (NET) 502 465

Deferred tax asset recognised in the balance sheet

5 m 2000 1999

Loans and advances to customers incl. loan loss provisions 100 23

Other assets 23 –

Amounts owed to customers and banks 24 –

Provisions for pensions and severance paymentsand other provisions 345 325

Other balance sheet items – 57

Tax losses carried forward 212 137

TOTAL DEFERRED TAX ASSETS 704 542

Property and equipment 15 19

Financial fixed assets 181 58

Trading assets/liabilities 5 –

Liabilities evidenced by certificates 1 –

TOTAL DEFERRED TAX LIABILITIES 202 77

DEFERRED TAX ASSET (NET) RECOGNISED IN THE BALANCE SHEET 502 465

For each consolidated unit, deferred tax assets and liabilities attributable to the same local

tax authority have been netted and the net amount has been included in the item “Other

assets”.


5 m 2000 1999

Money market deposits by banks 45,019 40,478

Refinanced export loans 10,245 8,973

Savings deposits 16,174 17,523

Sight deposits 13,663 10,435

Time deposits 23,210 13,702

Other amounts owed to banks and customers 3,841 4,207

AMOUNTS OWED TO BANKS AND CUSTOMERS 112,152 95,318

(17) Amounts owed

to banks and customers


Amounts owed to banks and customers by region

5 m 2000 1999

Austria 49,510 44,417

Abroad 62,642 50,902

of which: Central and Eastern Europe 10,958 6,120

of which: North America 12,717 4,618

TOTAL 112,152 95,318


5 m 2000 1999

Mortgage bonds 1,147 1,365

Municipal bonds 1,592 1,687

Other debt securities 10,132 6,194

DEBT SECURITIES ISSUED 12,871 9,246

Bonds 2,046 2,646

Commercial paper 1,247 1,548

Medium-term notes 901 1,238

Certificates of deposit 13,738 10,891

Own acceptances and promissory notes 350 208

Other money market paper 130 150

OTHER LIABILITIES EVIDENCED BY CERTIFICATES 18,412 16,681

(18) Liabilities evidenced

by certificates



Amounts owed to banks 5,196 40,495 2,888 1,418 9,109 59,105

Amounts owed to customers 15,878 20,750 7,726 4,750 3,942 53,047

Amounts owed to banksand customers – 2000 21,074 61,245 10,614 6,168 13,051 112,152

Amounts owed to banks 3,374 37,058 2,190 3,501 7,310 53,433

Amounts owed to customers 13,004 11,894 5,046 5,217 6,724 41,885

Amounts owed to banksand customers – 1999 16,378 48,952 7,236 8,718 14,033 95,318


Debt securities issued are listed securities evidenced by certificates. Other liabilities evi-

denced by certificates are unlisted securities issues of the Bank Austria Group.

5 m 2000 1999

Severance payments, pensions and similar obligations 2,423 2,243

Provisions for taxes 143 50of which: for current taxes 63 37of which: for deferred taxes 80 13

Other provisions 407 569of which: for impending losses 327 364of which: for restructuring costs 80 205

TOTAL PROVISIONS 2,972 2,862

Compared with the figures published in the previous year, provisions for indeterminate

liabilities in the amount of 1 311 m were reclassified pursuant to IAS 37 as other liabilities

retroactively for 1999.

Deferred tax liability recognised in the balance sheet

5 m 2000 1999

Loans and advances to banks and customers incl. loan loss provisions 11 3

Financial fixed assets 42 3

Other assets 4 –


Provisions for pensions and severance paymentsand other provisions – 1

TOTAL DEFERRED TAX LIABILITIES 80 13

DEFERRED TAX LIABILITY (NET)RECOGNISED IN THE BALANCE SHEET 80 13

For each consolidated unit, deferred tax assets and liabilities attributable to the same local

tax authority have been netted and the net amount has been included in the item “Provisions”.

(19) Provisions



Debt securities issued – 503 880 6,740 4,747 12,871

Other liabilities evidenced by certificates – 14,648 1,007 1,412 1,345 18,412

LIABILITIES EVIDENCEDBY CERTIFICATES – 2000 – 15,151 1,887 8,152 6,092 31,283

Debt securities issued – 253 927 4,964 3,102 9,246

Other liabilities evidenced by certificates – 9,703 3,454 1,797 1,727 16,681

LIABILITIES EVIDENCEDBY CERTIFICATES – 1999 – 9,956 4,381 6,760 4,829 25,926


5 m 2000 1999

Pension provision as at 1 January (= present value of future benefits earned) 2,243 3,022+/– change in group of consolidated companies 8 –

+ interest cost 98 176

+ current service cost 41 71

+ past service cost 38 –

+ additional amount from the provision for restructuring costs 99 –+/– balance of transfers from / payments to Austrian mandatory

pension insurance scheme (ASVG) – 2

– pension payments of the reporting year –104 –126

– settlement – –907+/– actuarial gain/loss as at 31 December – 6

Pension provision as at 31December (= present value of future benefits earned) 2,423 2,243

5 m 2000 1999

Other amounts payable 1,924 2,167

Negative market valueson derivative financial instruments 5,294 4,700of which: equity derivatives 46 57of which: exchange rate derivatives 1,438 1,540of which: interest rate derivatives 3,810 3,055of which: other derivatives – 48

Other liabilities 828 581 *

Deferred income 253 141

TOTAL OTHER LIABILITIES 8,299 7,588

*) Compared with the figures published in the previous year, provisions for indeterminate liabilitiesin the amount of 3 311 m were reclassified pursuant to IAS 37 from provisions to other liabilitiesretroactively for 1999.

5 m 2000 1999

Subordinated liabilities 3,805 3,100

Supplementary capital 1,225 378

Subordinated capital 5,030 3,478

(20) Other liabilities

(21) Subordinated capital

Additional IAS disclosuresThe following table shows the fair values of balance sheet items and related off-balance

sheet transactions. Loans and advances to, and placements with, banks as well as loans and

advances to customers are stated after deduction of loan loss provisions. The fair values

indicated in the table are the amounts for which the financial instruments could have been

traded between knowledgeable, willing parties in an arm’s length transaction at the balance

sheet date. To the extent that market prices were available from exchanges or other efficient

markets, these were stated as fair values. For the other financial instruments, internal

valuation models were used, in particular the present value method. For fixed-rate loans and

advances to, and amounts owed to, banks and customers with a remaining maturity of, or

regular interest rate adjustment within, less than one year, the balance sheet values were

stated as fair values. Investments in listed companies are included in the fair value of financial

fixed assets at their market value as at the balance sheet date.

The following tables show the amounts of Bank Austria’s loans and advances to, and

amounts owed to, subsidiaries as well as other companies in which Bank Austria holds an

equity interest. Business relations with these companies are maintained on terms and

conditions in line with banking practice.

146 Additional IAS disclosures

(22) Fair values

(23) Loans and advances to,

and amounts owed to,

subsidiaries and companies in

which an equity interest is held



Subordinated liabilities – 10 62 1,527 2,206 3,805

Supplementary capital – – – 69 1,156 1,225

Subordinated capital – 2000 – 10 62 1,596 3,361 5,030

Subordinated liabilities – – 45 1,340 1,715 3,100

Supplementary capital – – – 44 334 378

Subordinated capital – 1999 – – 45 1,384 2,049 3,478

5 m Diff. between Diff. between2000 1999 book value and book value and

Book value Fair value Book value Fair value fair value in 2000 fair value in 1999

Loans and advances to,and placements with, banks 39,371 39,520 29,322 29,416 150 93

Loans and advances to customers 79,517 79,876 72,374 72,552 359 178

Financial fixed assets 26,182 26,479 23,233 23,624 297 392

Amounts owed to banks 59,105 59,107 53,433 53,422 3 –11

Amounts owed to customers 53,047 53,015 41,885 41,842 –32 – 43

Liabilities evidenced by certificates 31,283 31,375 25,926 25,989 92 63

Subordinated capital 5,030 5,272 3,478 3,518 242 40

Segment reporting in accordance with IAS 14 (revised 1997) has two dimensions:

The primary segment reporting format is based on the internal reporting structure of

business segments, which reflects management responsibilities in the Bank Austria Group in

2000. The secondary reporting format is based on geographical segments.

The internal reporting structure comprises the following business segments:

Domestic Customer Business Corporate CustomersPrivate Customers and Professionals


Financial Markets

Equity Interests

Domestic Customer Business / Corporate Customers essentially includes the corporate

customer business of Bank Austria AG and Creditanstalt AG as well as the Austrian leasing

business.

Domestic Customer Business / Private Customers and Professionals comprises relation-

ships with retail and business customers, credit card business, and investment business.

International Business shows the activities of Bank Austria Creditanstalt International

(which merged with Bank Austria AG in the fourth quarter of 2000) and its subsidiaries, the

investment bank and the non-Austrian leasing business.

Financial Markets includes Treasury operations in a narrower sense (proprietary trading)

and equity trading.

Equity Interests covers holdings in companies (primarily industrial companies) which are

not included in any of the business segments described above.

Other items/reclassifications show inter-segment eliminations, reconciliations between

management results and the Group’s consolidated income statement, and profit contributions

which cannot be attributed to the individual business segments.

147Additional IAS disclosures

(24) Segment reporting

5 m Subsidiaries Other equity interests31 Dec. 2000 31 Dec.1999 31 Dec. 2000 31 Dec.1999

Loans and advancesLoans and advances to, and placements with, banks 457 171 1,961 1,755Loans and advances to customers 1,829 1,473 1,159 1,290Loan loss provisions – – – – 4Bonds and other fixed-income securities 11 30 191 230

TOTAL 2,297 1,675 3,310 3,270

LiabilitiesAmounts owed to banks 328 138 10,644 9,463Amounts owed to customers 126 553 336 319Liabilities evidenced by certificates – 18 43 76Subordinated capital – – 7 –

TOTAL 454 709 11,029 9,858


The result of each business segment is measured by the net income before taxes gener-

ated by the respective segment. In addition to the cost/income ratio, the return on equity is

one of the major indicators used for controlling the business segments.

The return on equity is determined by dividing net income before taxes by average

shareholders’ equity allocated to the business segment.

Capital allocation is based on supervisory guidelines. As a first step, the capital requirement

for the trading book is determined on a Group basis. Then the equity capital required to sup-

port 50% of the Group’s carrying amounts of equity interests in the financial sector is calcu-

lated. The remaining equity capital is allocated to the individual business segments in proportion

to the assessment basis (banking book) as defined in the Austrian Banking Act. The interest rate

on long-term riskless investments in the capital market is applied to allocated equity capital, and

the notional income from the investment of equity capital is included in net interest income.

Net interest income is split up according to the market interest rate method. Costs are

allocated to the individual business segments from which they arise.

The cost/income ratio is determined by dividing general administrative expenses by the

total of net interest income, net fee and commission income and net trading result.

Business segment data5 m Private Inter- Bank

Corporate Customers and national Financial Equity Other items/ AustriaCustomers Professionals Business Markets Interests reclassifications Group

Net interest income 2000 610 825 488 111 191 15 2,2401999 508 656 533 217 84 37 2,034

Losses on loans and advances 2000 –287 –93 –152 9 – –143 – 6661999 –197 –87 –104 –2 – 6 –3 – 400

Net fee and commission income 2000 243 439 176 13 –14 4 8621999 230 377 160 10 2 –2 777

Net trading result 2000 30 19 24 45 17 2 1371999 31 21 66 64 3 2 187

General administrative expenses 2000 –513 –1,022 – 422 – 190 –34 22 –2,1591999 –510 –963 – 416 –169 – 6 – 86 –2,149

Result of other operating activities 2000 23 –12 – 6 101 200 – 58 2481999 10 7 10 –7 149 –32 138

Net income before taxes 2000 107 157 108 90 359 –159 6621999 71 10 249 113 227 – 83 587

Assessment basis (average, asdefined in the Austrian Banking Act) 2000 35,058 10,407 20,868 4,613 4,990 1,669 77,604

1999 29,819 9,571 20,970 5,152 3,472 – 68,985

Equity (average) 2000 1,483 440 1,260 763 516 71 4,5331999 1,418 455 1,257 751 431 – 4,311

Return on equity before taxes in % 2000 7.2 35.7 8.6 11.8 69.7 – 14.61999 5.0 2.2 19.8 15.0 52.8 – 13.6

Cost/income ratio in % 2000 58.1 79.6 61.4 112.1 – – 66.71999 66.4 91.4 54.8 58.0 – – 71.7

Income and expenses as well as assets are attributed on the basis of the location of the

business unit recording the transaction.

Within Bank Austria, assets are put on a non-accrual status if, as a result of the economic

outlook, assets generally earning interest are not expected to produce cash inflows in the

subsequent period.

5 m 2000 1999

Non-accrual assets within loans and advances to,and placements with, banks 518 557

Non-accrual assets within loans andadvances to customers 2,269 2,057

ASSETS PUT ON A NON-ACCRUAL STATUS 2,787 2,614

Bank Austria has pledged cash and cash equivalents as security for liabilities in connection

with the clearing of securities and foreign exchange transactions.

5 m 2000 1999

Margin requirement at futures and options exchanges and with various brokers 141 122

Security provided in favour of Oesterreichische Kontrollbank AGfor the settlement of securities transactions 28 46

Security provided in favour of foreign banks for securities lending transactions 44 368

Assets pledged in favour of foreign banks and other foreign financial institutions 533 321

Security provided in favour of Euro-Clear for securities transactions 785 491

Claims assigned in favour of Oesterreichische Kontrollbank AG 6,623 6,164

SUB-TOTAL 8,152 7,512

Cover fund for savings deposits held in trust for guardianships 87 87

Cover fund for funded bonds 747 839

Cover fund for mortgage bonds and municipal bonds 2,128 3,681

TOTAL 11,113 12,119


Breakdown of income by geographical segment

5 m Western Central andAustria Europe Eastern Europe America Asia Total

2000 1999 2000 1999 2000 1999 2000 1999 2000 1999 2000 1999

Net interest income 1,556 1,522 110 82 205 165 328 214 41 51 2,240 2,034

Losses on loans and advances 519 281 –3 –3 8 9 143 88 –1 25 666 400

Net interest incomeafter losses on loans and advances 1,037 1,241 113 86 197 155 185 126 42 26 1,574 1,635

Net fee and commission income 709 638 28 28 104 72 10 28 10 9 862 777

Net trading result 96 124 –2 –1 21 44 17 13 5 7 137 187

(25) Assets on which

interest is not being accrued

(26) Assets pledged

as security


Subordinated assets are contained in the following balance sheet items:

5 m 2000 1999

Loans and advances to, and placements with, banks 199 41of which: subsidiaries* 197 –of which: equity interests 1 3

Loans and advances to customers 113 156of which: subsidiaries – –of which: equity interests 4 4

Bonds and other fixed-income securities 533 265of which: subsidiaries – –of which: equity interests – –

Shares and other variable-yield securities 52 97of which: subsidiaries 6 –of which: equity interests 6 18

*) In the item “Loans and advances to, and placements with, banks” the sub-item “of which:subsidiaries” results from business relations with other banks of the HVB Group which are notconsolidated in these consolidated financial statements (see note 35).

5 m 2000 1999

Acceptances and endorsements 103 186

Other contingent liabilities 10,976 9,236

TOTAL CONTINGENT LIABILITIES 11,079 9,422

Liabilities arising from sales with an optionto repurchase 2,368 971

Other commitments* 16,824 17,937

TOTAL COMMITMENTS 19,192 18,908

*) Other commitments include unutilised loan commitments.

(27) Subordinated assets

(28) Contingent liabilities

and commitments


At the end of 2000, assets and liabilities denominated in the following currencies were

held within Bank Austria:

5 m Bank Austria Group2000 1999

Assets Liabilities Assets Liabilities

Euro 93,037 97,606 82,885 81,602

US dollar 36,949 35,876 32,601 39,867

Swiss franc 11,625 10,781 8,407 2,424

Yen 5,805 4,664 3,777 3,308

Other 17,604 16,092 12,329 12,798

SUB-TOTAL –FOREIGN CURRENCIES 71,983 67,413 57,114 58,396

TOTAL 165,019 165,019 139,999 139,999

Under repurchase agreements, assets were sold to third parties with a commitment to

repurchase the financial instruments at a price specified when the assets were sold.

The following table shows repurchase agreements concluded by Bank Austria:

5 m 2000 1999

Loans and advances to, and placements with, banks 2,216 719

Loans and advances to customers – 7

Trading assets 3,306 34

Other current financial assets – 1

(29) Assets and liabilities

in foreign currency

(30) Repurchase agreements


The following is a list of selected equity interests of Bank Austria.

The list of equity interests required pursuant to the Austrian Commercial Code / Austrian

Banking Act is part of the separate financial statements of Bank Austria AG and may be

ordered free of charge.

Name and domicile of company Proportion in %Ownership Voting power,

interest held if different

CONSOLIDATED COMPANIES

Asset Management GmbH, Vienna 100.00

BA/CA Asia Ltd., Central Hong Kong 100.00

BA/CA Asset Finance Ltd., Glasgow 94.41

BA/CA Capital Management Ltd., Central Hong Kong 66.67

Bank Austria Cayman Islands Ltd., Georgetown, Cayman Islands 100.00

Bank Austria Creditanstalt (Schweiz) AG, Zurich 88.00

Bank Austria Creditanstalt American LCC, New York 100.00

Bank Austria Creditanstalt Croatia d.d., Zagreb 80.02

Bank Austria Creditanstalt Czech Republic a.s., Prague 78.58

Bank Austria Creditanstalt d.d., Ljubljana 99.54

Bank Austria Creditanstalt Deutschland AG, Munich 100.00

Bank Austria Creditanstalt Hungary Rt., Budapest 90.04

Bank Austria Creditanstalt Leasing GmbH, Vienna 99.98

Bank Austria Creditanstalt Romania S.A., Bucharest 100.00

Bank Austria Creditanstalt Slovakia a.s., Bratislava 100.00

Bank Austria Handelsbank Aktiengesellschaft, Vienna 100.00

Bank Austria Treuhand AG, Vienna 75.00

Bank Austria Wohnbaubank Aktiengesellschaft, Vienna 89.98

BANKPRIVAT AG, Vienna 100.00

CA Betriebsobjekte AG, Vienna 100.00

CA IB Investmentbank AG, Vienna 100.00

CA Wohnbank AG, Vienna 100.00

CABET-Holding AG, Vienna 100.00

CAIB (U.S.A.) Inc., New York 100.00

CAPITAL INVEST die Kapitalanlagegesellschaft der Bank Austria Creditanstalt Gruppe GmbH, Vienna 100.00

CB Bank Austria Creditanstalt (Russia) ZAO, Moscow 100.00

Creditanstalt AG, Vienna 100.00

Gornoslaski Bank Gospodarczy S.A., Katowice 68.71

JSCB “Bank Austria Creditanstalt Ukraine”, Kiev 75.10

Konzern Service und Beratung GmbH, Vienna 100.00

Lassallestraße Bau-, Planungs-, Errichtungs- und Verwertungsgesellschaft m.b.H., Vienna 100.00

MEH Vermögensverwaltung GmbH, Vienna 100.00

(31) List of selected

equity interests

Powszechny Bank Kredytowy S.A., Warsaw 56.64

RINGTURM KapitalanlagegmbH, Vienna 40.00 controlled

VISA-SERVICE Kreditkarten Aktiengesellschaft, Vienna 75.00

WAVE Solutions Information Technology GmbH, Vienna 100.00

Z.E.H. Vermögensverwaltung GmbH, Vienna 100.00

ASSOCIATED COMPANIES VALUED AT EQUITY

Adria Bank Aktiengesellschaft, Vienna 29.33

B.I.I. Creditanstalt International Bank Ltd., Grand Cayman 50.00

Banco B.I. Creditanstalt S.A., Buenos Aires 50.00

Banco BBA-Creditanstalt S.A., São Paulo 48.00 32.65

Bank für Kärnten und Steiermark AG, Klagenfurt 29.15 29.93

Bank für Tirol und Vorarlberg AG, Innsbruck 41.72 41.70

Bausparkasse Wüstenrot AG, Salzburg 26.00

BBA Finanz- und Unternehmensbeteiligungs Ges.m.b.H., Vienna 100.00

CA Versicherung AG, Vienna 50.00

Investkredit Bank Aktiengesellschaft, Vienna 24.77

Oberbank AG, Linz 32.38 33.39

Oesterreichische Kontrollbank Aktiengesellschaft, Vienna 40.89

Union Versicherungs-Aktiengesellschaft, Vienna 33.33

UNCONSOLIDATED

A. SUBSIDIARIES

AWT Internationale Handels und Finanzierungs AG, Vienna 100.00

Bank Austria Creditanstalt (Singapore) Ltd., Singapore 100.00

BANK AUSTRIA Securities, Inc., New York, N.Y. 100.00

CA Bau-Finanzierungsberatung Gesellschaft m.b.H., Vienna 100.00

CA Management-Systems-Consult Gesellschaft m.b.H., Vienna 100.00

CA-Telefon Informations- und Auftrags-Service GmbH, Vienna 100.00

DATA AUSTRIA Datenverarbeitungs GmbH, Vienna 100.00

Diners Club Austria AG, Vienna 99.80

GANYMED Immobilienvermietungsgesellschaft m.b.H., Vienna 100.00

Grundstücke- und Gebäudeverwaltungs-AG, Vienna 74.99

HYPERION Immobilienverwaltungsgesellschaft m.b.H., Vienna 100.00

Informations-Technologie Austria GmbH, Vienna 61.37 not controlled

Lenzing Aktiengesellschaft, Lenzing * 50.10

Österreichisches Verkehrsbüro Aktiengesellschaft, Vienna 55.26

Steyr Mannlicher AG & Co. KG, Vienna 100.00

UNIVERSALE-BAU AG, Vienna 100.00

WIGAST Gesellschaft m.b.H., Vienna 100.00

*) sold in 2001





B. ASSOCIATED COMPANIES

FactorBank AG, Vienna 42.00

Lambacher HITIAG Leinen AG, Stadl-Paura 45.56

M.A.I.L. Finanzberatung Gesellschaft m.b.H., Vienna 49.00

Österreichische Hotel- und Tourismusbank GmbH, Vienna 50.00

Vereinigte Pensionskasse Aktiengesellschaft, Vienna 30.11

C. OTHER COMPANIES

Allgemeine Baugesellschaft-A.Porr Aktiengesellschaft, Vienna 32.61 37.30

Einlagensicherung der Banken und Bankiers Gesellschaft m.b.H., Vienna 17.46

Europay Austria Zahlungsverkehrssysteme GmbH, Vienna 19.45

NOTARTREUHANDBANK AG, Vienna 25.00

WIENER STÄDTISCHEAllgemeine Versicherung Aktiengesellschaft, Vienna 8.00 8.98

Notes:

The figure indicated under ownership interest held is the Bank Austria Group’s ownership interest in theequity of the company, expressed as a percentage rate. Ownership interests in the company held byconsolidated companies and other subsidiaries are added up.

The proportion of voting power, if different, includes all voting shares and may differ from the ownershipinterest in capital as a result of syndicate agreements, non-voting preference shares and/or othersupplementary agreements.

Controlled = controlled on the basis of syndicate or other agreements with shareholders outside the Group

Not controlled = not controlled on the basis of syndicate or other agreements with shareholders outsidethe Group



155

158 Risk report

Bank Austria identifies, measures, monitors and manages all risks associated with banking

business on a Group-wide basis and coordinates these activities with the risk control and risk

management units of HypoVereinsbank.

Bank Austria divides the monitoring and controlling processes associated with risk

controlling and risk management into the following categories:

– market risk

– credit risk

– liquidity risk

– operational risk

– other risk

The Managing Board determines the risk policy and approves the principles of risk

controlling and risk management, the establishment of limits for all relevant risks, and the

risk control procedures.

In performing these tasks, the Managing Board is supported by specific committees and

independent risk controlling and risk management units.

The asset/liability management committee is responsible for the management of balance-

sheet structure positions. A separate market risk committee controls market risk arising from

the trading books and establishes a framework and limits for the foreign branches and

banking subsidiaries. Country risks are assessed by the country risk committee.

The “Market Risk Management and ALCO Support”, “Credit Risk Methods and Portfolio

Management” and “Operational and Group Risk” departments are in charge of developing

and implementing the methods of risk measurement, further improving and refining the

measurement and control instruments, developing and maintaining manuals, as well as

reporting on Bank Austria’s risk profile in an independent and neutral manner.

Credit risk is managed for the Group as a whole, and across all types of products and

customer groups, by the Risk Management Division.

In respect of other risks, the methods used by Bank Austria for the assessment of risks

associated with equity interests, risks inherent in the real estate portfolio and business risks

will be adjusted to the methods used by HVB to enable HVB to perform Group-wide overall

risk assessment. In line with the principle of dual management and control, both economic

capital and regulatory capital will be determined. These data will be used to determine Bank

Austria’s overall risk, taking account of all types of risk mentioned above. This will provide the

basis for making decisions on risk capital allocation.

Risk Report

(32) Global risk management

At Bank Austria, market risk management encompasses the recognition, measurement,

monitoring and management of all market risks resulting from the banking business. The

processes and methods used for defining and monitoring limits as well as measuring risks

associated with trading activities have been summarised in a market risk management manual.

Over the past few years, the value-at-risk (VAR) method has generally become the

accepted method of measuring market risk. This method was introduced throughout Bank

Austria on a Group-wide basis and has replaced or supplemented the former limit systems.

Value at risk represents the potential loss which might arise from a trading book and is

determined by the statistically expected changes in market parameters.

Bank Austria uses a model which has been developed by itself and takes a variance-

covariance approach. Daily risk measurement is based on two standard deviations and a one-

day holding period. Using this method, possible losses arising from the trading books are no

larger, with a probability of 97.5%, than the amount of value at risk.

As at 31 December 2000, value at risk for our trading books was as follows:

Bank Austria AG Bank Austria Group

Exchange rate risk v 1.5 m v 1.4 m

Equity position risk v 4.0 m v 4.4 m

Interest rate position risk v 1.4 m v 1.4 m

From 1 January 1998 onwards, the internal model of risk measurement has additionally

been used for the purpose of determining the capital resources required to be held pursuant

to the Second Amendment to the Austrian Banking Act (implementation of the Capital

Adequacy Directive). Under this model, value at risk has also been calculated for a two-week

holding period. This calculation takes into account the quantitative standards required by law

and by the Austrian Federal Ministry of Finance (one-sided confidence level of 99%, multi-

plier 3, add-on in the amount of the specific position risk); the multiplier of 3 was confirmed

by the Austrian National Bank in an expert opinion issued pursuant to Section 26b of the

Austrian Banking Act.

As at 31 December 2000, this results in the following capital requirements:

Bank Austria AG Bank Austria Group

Risk associated with open foreignexchange positions v 25.0 m v 25.5 m

General position risk in debt instruments v 21.9 m v 27.7 m

General and specific position risk in equities v 55.9 m v 61.3 m

OVERALL RISK* w 91.5 m w 102.8 m

*) The OVERALL RISK capital requirement is not the sum of the individual risk categories becausecorrelations between exchange risk and interest rate risk reduce overall risk.

159Risk report

Market risks on

trading activities

160 Risk report

In addition to the VAR limits – and depending on the type of business – gamma, vega,

volume, position and basis-point-value limits as well as stop-loss limits are set. The limits are

set according to the level of risk tolerance defined in respect of the budgeted profit

components.

Within Bank Austria, the reliability and accuracy of the internal model is monitored by daily

back-testing comparing the value-at-risk amounts with the actually observed fluctuations in

market parameters and in the total value of the trading books. The results of back-testing

have so far continued to confirm the accuracy and reliability of the model.

During the 2000 financial year, back-testing revealed no excess, which means that the

model is in the green zone under the Austrian Banking Act and the Basle regulatory guidelines.

Value-at-risk calculations in the trading sector are complemented by various stress

scenarios to identify the potential effects on the Group’s earnings of stressful market

conditions for which there is only a low probability. The assumptions made under such stress

scenarios include extreme movements in prices or rates and a dramatic deterioration in

market liquidity.

The current stress scenarios of Bank Austria – broken down into the three major risk

categories – show the following levels:

Result

1-day VAR

Value at r isk (1 day) and back-testing results

3 m

03.0

114

.01

26.0

107

.02

17.0

229

.02

10.0

322

.03

03.0

416

.04

13.0

426

.04

09.0

519

.05

31.0

514

.06

27.0

607

.07

19.0

731

.07

10.0

823

.08

04.0

914

.09

26.0

906

.10

18.1

031

.10

13.1

123

.11

05.1

218

.12

–15

–10

–5

0

5

10

15

161Risk report

Interest rates Exchange rates Equities

Developed countries +/– 60 bp +/– 15% +/– 15 –30%

Emerging markets +/– 500 bp +/– 30% +/– 40 –50%

New Economy equities n.a. n.a. +/– 30 –40%

In the interest rate sector, tests are carried out to simulate a straightforward parallel shift,

a turnaround in the yield curve, and a strong long-term increase in money market rates.

Bank Austria uses a separate procedure to evaluate market risks resulting from the general

structure of the balance sheet and from the decisions of the asset/liability management

committee (ALCO). ALCO ensures the management of balance-sheet structure positions

through money market and capital market transactions. Bank Austria’s profit centres are

released from any market risk through a matched funds transfer pricing system applied

throughout the Group. Splitting net interest income into a terms-related contribution

allocated to the business divisions and a contribution from maturity transformation creates

the basic conditions for uniform centralised management of all market risks by ALCO.

Given the special significance and complexity of domestic customer business, market risks

resulting from the banking book positions are also regularly analysed by means of simulations

of net interest income volatility. In addition to various interest rate scenarios and the business

volume as at the reporting date, these simulations are also based on assumptions regarding

new business, demand behaviour and general developments affecting margins in those

market segments which are of greatest importance to Bank Austria. By modelling trends in

net interest income over the projection period, the bank can thus make assessments of the

maximum risk potential and forecast developments. In this way, the bank can identify risks in

this area at an early stage and take appropriate measures. Additionally, the value-at-risk

method is used to analyse the banking book.

A comprehensive analysis of the Group’s interest rate risk as at 31 December 2000

showed the following interest rate sensitivities, defined as the effects of an interest rate

increase of one basis point (0.01%) on fixed-interest-bearing assets and liabilities.

Market risks and

asset/liability management

162 Risk report

The “other positions” involve interest rate risk resulting from lending and deposits

business and from ALCO activities.

The general principles applied to credit rating processes and lending decisions are laid

down in a set of rules (general principles and specific principles for individual customer

groups, products and regions). These rules are regularly reviewed in the light of current

developments in the area of risk assessment. Discretionary powers and approval authority are

exclusively granted to experienced lending officers and include authority to approve new

business and to review exposures. Approval authority is differentiated according to amount,

creditworthiness of business partners, maturity and security.

In each case, new transactions are approved, and existing exposures involving credit risk

are reviewed, in line with the two-signatures principle. Primary responsibility for risk rests with

the unit serving customers. Within the Group, primary responsibility for risk encompasses the

primary assessment of credit risk.

Secondary responsibility for risk rests with a risk management unit which is separate from

the units serving customers. Secondary responsibility for risk comprises mainly the secondary

evaluation of credit applications.

The units serving customers regularly review loan exposures for their risk content and

submit them to the credit risk management unit for approval.

Special attention is given to reviewing and managing bad and doubtful debt. As soon as

early warning signals appear, bad and doubtful debt is dealt with by specially trained staff.

An exposure is classified as bad or doubtful if, in view of the borrower’s financial position and

of the security provided, a loss of principal and/or interest may be expected. Such exposures

are subject to special approval authority, both at the units serving customers and at the risk

management units.

55 Up to 1 month to 3 months to 1 year to Over Total1 month 3 months 1 year 5 years 5 years

Euro Trading 746 47,155 –183,243 106,447 72,190 43,295

Euro Other positions 15,631 – 55,804 –206,624 –354,192 –1,505,567 –2,106,556

Pound sterling Trading 6,810 6,709 – 55,245 – 45,193 –14,452 –101,371

Pound sterling Other positions 4,142 9,354 –134,159 –145,869 –194 –266,726

US dollar Trading 33,130 – 5,370 –70,862 5,030 –1,564 – 39,636

US dollar Other positions – 2,662 –130,932 –203,949 216,113 101,834 – 19,596

Swiss franc Trading 4,738 – 38,938 –12,152 15,320 –12,407 – 43,439

Swiss franc Other positions 5,746 37,528 –151,639 22,505 25,183 – 60,677

Yen Trading 3,336 14,497 – 47,129 –12,797 –32,482 – 74,575

Yen Other positions – 2,159 –12,418 – 6,227 57,988 10,434 47,618

Other Trading 4,679 5,047 –20,011 –3,854 17,966 3,827

Other Other positions 1,842 –7,823 –17,765 16,560 –22,323 – 29,509

Credit /counterparty risk

163Risk report

In the area of credit/counterparty risk, Bank Austria has made an essential step towards

meeting its objective of managing the Group’s credit portfolio on the basis of risk-adjusted

return (RAROC). The approach to credit risk control has been further developed and refined

at the individual-loan and portfolio levels.

Credit/counterparty risk is defined as the probability of incurring a financial loss resulting

from a borrower’s/counterparty’s inability to meet its obligations. This comprises counterparty

risk, international transfer risk and settlement risk.

Credit/counterparty risk is analysed for the classic banking products – such as loans and

commitments to lend – and for products in the trading book as well as derivative financial

instruments.

Bank Austria gives special attention to risks on (OTC) derivatives contracts with a view to

limiting the future potential default risk on such contracts.

RAROC (risk-adjusted return on capital) analyses credit transactions with a two-dimen-

sional risk approach: on the one hand, the expected loss resulting from a default is

calculated; on the other hand, unexpected loss and economic capital are determined on an

individual loan basis, taking account of portfolio effects. Expected loss is the average annual

loss rate, based on historical experience, resulting from events of default. It is calculated by

multiplying the loss probability by the credit equivalent and the loss rate. Unexpected loss is

a measure of the annual fluctuations of actual loan losses around expected loss. In the

management system, the loss expected in the lending business is reflected in standard risk

costs, while unexpected loss will be taken account of in the future through the allocation of

economic capital.

Refined rating instruments have been designed and implemented to support this control

system and to optimise risk assessment. Activities in this area focused on implementing and

applying the new rating system for corporate customers in Austria, developing a credit rating

system for Central and East European companies, and designing a model for small and

medium-sized businesses. These rating models provide a basis for quantifying loan default

risk in the form of loss probabilities.

In line with these new rating systems, credit analysis is based on both quantitative criteria,

such as financial statements, and qualitative factors taking into account also the possible

future development of a company. If the borrower is a member of a group, the group will

also be analysed.

164 Risk report

The objective is to assign to all customers a specific rating on a rating scale. This rating

scale can be translated into the rating scale of HVB; the scales will be standardised shortly.

This rating scale is applied across the Bank Austria Group. It can be translated into the

previously used rating categories and into external rating scales. An empirical loss probability

has been determined for each rating category of this scale, exclusively based on the customer’s

creditworthiness. Security is additionally taken into account in determining the expected loss.

In the past year a quantitative model to determine credit risk for the Group’s entire port-

folio was implemented step by step. This credit portfolio model is used to identify and, if

necessary, reduce risk concentrations as well as measuring correlations within the portfolio

with a view to diversifying risk. In addition, economic capital can also be calculated by using

this model. This will supplement the allocation of regulatory capital with a capital allocation

method based on risk-adjusted return.

At the same time, through this work on refining and further developing the methods of

credit risk management, Bank Austria is preparing for possible changes in banking super-

vision guidelines, which are currently under consideration with a view to more precisely

differentiating between capital requirements for different credit risks and recognising internal

rating systems for supervisory purposes.

Increasing attention is being given to operational risk. Therefore, at the end of 2000, Bank

Austria set up a department which concentrates on operational risk and Group risk.

This was another step made with a view to covering all types of risk in the banking

business. Another reason why this unit was created is that regulators are paying closer

attention to “other risks” at banks. In the foreseeable future, operational risk, the main

component of this risk category, is to be backed with capital resources on a compulsory basis.

Moreover, the need for accurate measurement and control has also led to stronger emphasis

being placed on dealing with operational risk.

Operational risk is defined as the risk of unexpected losses due to human error, flawed

management processes, natural and other disasters, technological failures, and changes in

the external environment (event risk). For example, in the future, IT system failures, damage

to property, processing errors or fraud will be subject to accurate and consolidated risk mea-

surement and management, on which the calculation of risk capital will be based.

Operational risk

165Risk report

Processes associated with risk are detected and addressed in close coordination and co-

operation with other service units such as internal audit, compliance or the legal department.

Also to be considered is the fact that Bank Austria has always taken numerous measures in

the various divisions to manage and reduce operational risk. Examples are data security

measures, measures to ensure the confidentiality and integrity of stored data, access

authorisation systems, the two-signatures principle, and a large number of monitoring and

control processes as well as staff training programmes.

This means that the principal activities in the area of operational risk will be to

– further sensitise all units of the Bank Austria Group to issues concerning operational risk,

– develop a high-quality database comprising internal and external loss data for risk

measurement,

– design a model to measure operational risks on an actuarial basis,

– identify insurable operational risks,

– introduce a qualitative approach such as control self assessment to assess control quality

and derive necessary measures.

The main tasks in 2001 will include establishing an information system in the Bank Austria

Group to collect consistent and complete data on operational risk. Based on cause-related

categories of individual risks, these data will be used for internal reporting and the risk

measurement system currently being established. This system will help to identify sources of

risk at an early stage and to quantify operational risk in order to manage the allocation of

economic capital. Attention will also be given to coordination with HypoVereinsbank so as to

ensure the rapid and smooth inclusion of risk data in the risk calculations of the HVB Group.

In addition, the use of questionnaire-based control self assessment to ascertain control

and process quality will be extended to the Bank Austria Group. This will provide a faster and

more comprehensive insight into the risk profile of the divisions and their action plans to

minimise risk.

Finally, another focus of activities in the current year will be on adjusting the organisational

structure to take account of operational risk, together with the establishment of a cross-

divisional Operational Risk Committee.

166 Risk report

The net charge for losses on loans and advances was 1 666 m, substantially higher than

the 1999 figure and the original budget figure for 2000.

An analysis by business segment presents the following picture:

5 m Corporate Private Inter- Financial Equity Other BankCustomers Customers and national Markets Interests positions/ Austria

Professionals Business reclassifications Group

Net charge forlosses on loans andadvances – 2000 –287 –93 –152 9 – –143 –666

Net charge forlosses on loans andadvances – 1999 –197 –87 –104 –2 –6 –3 –400

The increase in the provisioning charge was due to the general trend of risks in Austria

and to the application of the HVB Group’s uniform Group-wide valuation system.

In the USA, uncertainties over the US economy were growing and massive problems were

experienced, particularly among growth companies. For these reasons, the charge for speci-

fic risk provisions was higher than originally expected.

Provisioning requirements in the Central and East European markets remained at a low level.

The activity levels of Bank Austria in derivative instruments are shown in the table “Total

volume of outstanding financial derivative transactions”.

As at 31 December 2000, the notional amounts of financial derivative transactions totalled

1 449 bn (1999: 1 432 bn). Trading activities accounted for 77% (83%) of this total volume,

the remainder related to banking book positions.

Derivatives are over-the-counter (OTC) contracts, concluded directly with the counter-

parties, or exchange-traded contracts. Most of the OTC business volume relates to interbank

trading. Corporates and institutional customers use derivative instruments for interest-rate

and exchange risk management purposes.

Exchange-traded instruments account for a relatively small proportion of the total volume

of transactions.

Derivative financial instruments are classified as interest rate contracts, foreign exchange

contracts and securities-related transactions, in line with the form of presentation which is

widely used in the market. These categories are subdivided into forward transactions, swaps

and options as well as exchange-traded futures and options. Interest rate contracts accounted

for 1 358 bn, foreign exchange contracts totalled 1 87 bn, and securities-related transactions

amounted to 1 4 bn.

(33) Credit risk

(34) Financial derivatives

167Risk report

The table shows the notional amounts of transactions as well as positive and negative

market values as at the balance sheet date, divided into trading book and banking book

positions. These positions are stated at their market or fair values, reflecting the contract

values as at the balance sheet date.

Total volume of outstanding financial derivative transactions of the Bank Austria Group

5 m Trading book Banking bookNotional Dirty price Notional Clean priceamounts Pos. market value Neg. market value amounts Pos. market value Neg. market value

TOTAL 343,646.270 5,505.956 5,286.947 105,151.189 1,037.073 1,379.241

of which: OTC products 334,588.024 5,473.237 5,252.048 105,151.189 1,037.073 1,379.241of which: exchange-traded products 9,058.246 32.719 34.899 – – –

A. Interest rate contracts 263,468.700 4,001.699 3,723.130 94,644.958 842.088 851.481OTC products: 255,932.451 3,987.344 3,717.288 94,644.958 842.088 851.481Forward rate agreements 11,803.685 8.201 8.326 6,334.385 8.281 3.066Single-currency swaps 166,581.038 3,588.063 3,311.703 86,307.234 823.521 813.599Interest rate options bought 31,898.872 356.456 – 312.712 10.286 –Interest rate options sold 34,309.886 – 379.710 1,685.853 – 34.816Other interest rate contracts 11,338.970 34.624 17.549 4.774 – –

Exchange-traded products: 7,536.249 14.355 5.842 – – –Interest rate futures 5,782.136 6.358 1.843 – – –Options on interest rate futures 1,754.113 7.997 3.999 – – –

B. Foreign exchange contracts 76,264.937 1,471.921 1,533.976 10,450.432 192.922 524.760OTC products: 76,264.937 1,471.921 1,533.976 10,450.432 192.922 524.760Forward foreign exchange transactions 55,136.545 1,273.614 1,295.030 319.967 1.230 453Cross-currency swaps 6,491.322 99.166 150.241 10,124.258 191.692 524.307Currency options bought 7,712.727 99.141 – 3.000 – –Currency options sold 6,924.343 – 88.705 3.207 – –Other foreign exchange contracts – – – – – –

Exchange-traded products: – – – – – –Currency futures – – – – – –Options on currency futures – – – – – –

C. Securities-related transactions 3,912.633 32.336 29.841 55.799 2.063 3.000OTC products: 2,390.636 13.972 784 55.799 2.063 3.000Securities swaps – – – 26.700 – 3.000Equity options bought 871.556 9.896 – 29.099 2.063 –Equity options sold 1,246.572 – 784 – – –Other securities-related contracts 272.508 4.076 – – – –

Exchange-traded products: 1,521.997 18.364 29.057 – – –Equity and equity index futures 211.834 5.058 8.054 – – –Equity and equity index options 1,310.163 13.306 21.003 – – –

168 Risk report

For portfolio management and risk management purposes, recognised pricing models are

used. Contracts are valued at official market rates and prices (interest rates, exchange rates

and securities prices).

Transactions entered into within the Bank Austria Group on market terms and conditions

between the banking book and the trading book are included, unlike transactions within the

same book. This reflects the practice of immediately recognising in the income statement the

effect of value fluctuations arising from the trading book regardless of realisation.

The valuation of the banking book at the clean price takes account of interest accrued

until the balance sheet date and recognised in the income statement.

The market value of cross-currency swaps is presented with the exchange rate component.

The result from exchange rate components is to be offset against the net market value as at

the balance sheet date.

Activity levels in derivative instruments were increased mainly in interest rate contracts,

primarily swaps and options. To be mentioned in this context is the expansion of trading

activities in credit derivatives, which are conducted in Vienna and London. At the balance

sheet date, the volume of credit default swaps was 1 11 bn.

The bank continued to develop structured products, widening the range of products

offered to corporate customers in this sector to include cap loans.

The total volume of swaps (trading book: 1 173 bn, banking book: 1 96 bn) reflects the

build-up of the EUR swap book. In the CEE markets, business in PLN swaps and forward rate

agreements increased considerably, additionally boosted by a large number of Euro-PLN

issues of Western issuers. This in turn stimulated the cross-currency swap market (EUR/PLN).

Given the low level of CZK interest rates and the decline in SKK interest rates, there was

only moderate demand for interest rate derivatives in these currencies.

Foreign exchange markets experienced extremely high volatility, a decline in the external

value of the euro, and lower liquidity in the options market. ECB interventions added to the

nervousness prevailing among market participants. Several banks ceased to act as market

makers in options, thereby further reducing liquidity. This prompted Bank Austria to reduce

its options positions, too.

Growth in securities-related transactions was mainly due to OTC and exchange-traded

index options.

Turbulent developments in international stock markets were also reflected to a very large

extent in the forward markets. Driven by market nervousness, volatilities rose sharply in

spring and reached record levels in autumn 2000.

169Information required under Austrian law

In Austria, options on Telekom Austria shares stimulated activity in the derivatives market

in Vienna.

On the Austrian Futures and Options Exchange, the bank continued to exercise its market

maker function for instruments based on 10 equities and the ATX index in the year 2000.

The Austrian OTC market did not see any significant business volumes in 2000. On the

other hand, there was increased demand for OTC contracts based on foreign underlying

instruments with foreign counterparties.

Measured as a proportion of total activity levels in derivatives, Bank Austria’s banking book

was slightly expanded compared with the previous year, to 1 105 bn at the end of the year.

Swaps are the main type of instrument used to hedge the asset portfolio as well as the bank’s

own issues and those of other issuers.

As at 31 December 2000, potential credit risk arising for Bank Austria on contracts with

external counterparties in the event of the counterparty’s insolvency was 1 6 bn (1999: 1 4.5

bn). Positive market values represent potential replacement cost of the contracts. The credit

risk arising from derivative instruments is covered by capital resources; only OTC contracts are

covered, in the case of options only options bought are covered. Options sold represent a lia-

bility of the bank, exchange-traded contracts are secured by margin deposits.

The conclusion of netting (master) agreements makes it possible to offset claims against

liabilities arising from defined derivatives transactions. If netting agreements are taken into

account, the capital requirement for these contracts is about 40% lower.

Collateral agreements with selected counterparties are another method used to reduce

credit risk and capital requirements. First-class security (cash collateral and government

bonds) covers almost all of the default risk on OTC derivatives.

Market values expressed as a proportion of activity levels are relatively constant, moving

within the international standard range.

Information required under Austr ian lawLegal basis of consolidated financial statements prepared in accordance with International

Accounting Standards (IAS) in Austria: pursuant to the Austrian Consolidated Financial State-

ments Act as published in the Federal Law Gazette BGBl No. 49/1999 of 26 March 1999, a

new Section 59a was introduced to the Austrian Banking Act. Under Section 59a, a bank pre-

paring consolidated financial statements in accordance with internationally accepted account-

ing principles is exempted from the obligation to prepare consolidated financial statements

pursuant to the Austrian Banking Act. To qualify for such exemption, consolidated financial

statements must be consistent with the rules contained in Council Directive 86/635/EEC on the

annual accounts and consolidated accounts of banks and other financial institutions, and meet

the requirements of Section 245a (1) items 2 to 5 and (2) of the Austrian Commercial Code.

(35) Legal basis

under Austrian law

170 Information required under Austrian law

The auditors must certify that these requirements are met, and “the auditors’ report shall

report on the findings of the audit of the consolidated financial statements, and of the

management report of the Group, in a manner which is at least equivalent to that required

by Section 274 (1) to (4) of the Austrian Commercial Code”.

IASs are internationally accepted accounting principles and the auditors have certified that

the requirements of Section 59a of the Austrian Banking Act have been met. Thus the 2000

consolidated financial statements of Bank Austria AG in accordance with IAS meet the legal

requirements applicable in Austria.

All of the shares in Bank Austria AG were transferred to HVB against shares in HVB at the

exchange ratio of one for one. As a result, at the balance sheet date, the parent company of

Bank Austria AG was no longer BA Holding AG, Vienna, but HVB. Pursuant to Section 59a

of the Austrian Banking Act in conjunction with Section 30 of the Austrian Banking Act, the

superordinate credit institution having its registered office in Austria must prepare con-

solidated financial statements. Thus the consolidated financial statements of HVB do not have

the effect of exempting Bank Austria from this obligation pursuant to the Austrian Banking

Act, and therefore the consolidated financial statements contained in this annual report have

been prepared from the perspective of Bank Austria AG, Vienna, as superordinate domestic

credit institution.

A complete list of equity interests of Bank Austria AG is given in the notes to the

company’s separate financial statements and is available free of charge on request.

Consolidated shareholders’ equity is composed of paid-in capital (nominal capital plus

capital reserves) of Bank Austria AG, the Group’s parent company, and earned capital

(retained earnings of the Group plus consolidated net income).

In spring 2000, an offer was made to exchange participation certificates of Bank Austria

AG for no par value shares in Bank Austria in the period from 23 February to 22 March. This

offer related to new Bank Austria shares. About 870,000 participation certificates were

exchanged for no par value shares in Bank Austria AG.

In respect of participation certificates which were not exchanged, a resolution was passed

at the 9th ordinary Annual General Meeting on 26 May 2000 to call in the participation

certificates against cash payment pursuant to Section 102a of the Austrian Banking Act.

Upon completion of this transaction, only one category of equity instruments of Bank Austria

AG was listed on the Vienna Stock Exchange.

Through a share buyback Bank Austria AG reduced the number of equity instruments

issued by it to 114 million no par value bearer shares.

(36) Consolidated

shareholders’ equity and

shareholders’ equity of

Bank Austria AG

As part of the structural changes in Bank Austria AG in the 2000 financial year referred

to in previous sections of this annual report, the name of the listed company Bank Austria AG

was changed to Bank Austria Holding AG. Therefore, from that time onwards, the calculation

of earnings per share has been based on the listed shares outstanding of this company, which

held all shares in Sparkasse Stockerau, a company whose name was changed to Bank Austria

AG and to which the banking business of the former listed Bank Austria AG was spun off.

As part of the integration of HypoVereinsbank and Bank Austria, Bank Austria Holding AG

transferred its shares in Bank Austria AG as a contribution in kind to Hypovereinsbank AG,

Munich, with effect from 8 December 2000, against shares in HypoVereinsbank at a ratio of

one for one.

As Bank Austria AG pays dividends on the basis of Austrian law, only part of the

shareholders’ equity calculated pursuant to the Austrian Commercial Code and the Austrian

Banking Act is available for distribution: accumulated profit, free revenue reserve, and capital

reserve not subject to legal restrictions. For 2000, a maximum amount of 1 288 m (1999:

1 135 m) was available for distribution.

In 1999 and 2000, the Bank Austria Group employed the following average numbers of

staff (the number of employees at PBK, Poland, totalling just under 9,000, is not reflected in

the calculations of the annual average because PBK was only consolidated at the end of 2000):

Employees*

2000 1999

Salaried staff 16,866 16,980

Other employees 305 312

TOTAL 17,171 17,292

of which: in Austria 13,290 13,707of which: abroad 3,881 3,585

*) average man-years of staff employed in Bank Austria, excluding apprentices and employees onunpaid maternity or paternity leave

The list of members of the Managing Board and of the Supervisory Board of Bank Austria

AG is given on pages 188 to 191 of this annual report.

Severance payments and pensions include allocations to and reversals of the provision for

pensions and severance payments. In the reporting year, allocations and payments into a

pension fund for members of the Managing Board, senior executives and their surviving

dependants totalled 1 4.9 m, allocations and payments into a pension fund for other

employees and their surviving dependants amounted to 1 82.6 m.


(37) Employees

(38) Information on members

of the Managing Board,

the Supervisory Board and

the Employees ’ Council

Expenses for severance

payments and pensions


The emoluments of 11 members of the Managing Board active in the 2000 business year

totalled 1 7.5 m (1999: nine members, 1 2.5 m). Of this total amount, current salary payments

amounted to 1 3.3 m, and special payments and severance payments totalled 1 4.2 m. Emolu-

ments for activities on behalf of subsidiaries amounted to 1 0.1 m (adjusted1999 figure: 1 0.2 m).

Payments to former members of the Managing Board and their surviving dependants

totalled 1 3.6 m (adjusted 1999 figure: 1 4.0 m). Emoluments for activities on behalf of

subsidiaries amounted to 1 0.04 m as in the previous year.

The emoluments of members of the Supervisory Board active in the 2000 business year

totalled 1 0.5 m for Bank Austria AG as in the previous year. Emoluments for activities on

behalf of subsidiaries amounted to 1 0.02 m as in the previous year. Emoluments include

directors’ fees, annual bonuses, expense allowances and commissions.

As at the balance sheet date, outstanding loans and advances granted to members of the

Managing Board totalled 1 0.1 m as in the previous year. New loans and interest charged

totalled 1 0.1 m, while repayments amounted to 1 0.04 m.

Loans to members of the Supervisory Board amounted to 1 0.54 m (1999: 1 0.72 m). New

loans amounted to 1 0.1 m, while repayments totalled 1 0.1 m. Loans to the Supervisory

Board include those made to members of the Employees’ Council who are members of the

Supervisory Board. The maturities of the loans range from five to ten years. The rate of

interest payable on these loans is the rate charged to employees of Bank Austria AG.

The local financial statements of Group members contain the following assets held by

these companies on a trust basis:

5 m 2000 1999

Loans and advances to, and placements with, banks 62 12

Loans and advances to customers 1,619 1,120

Debt securities 6 33

Shares 52 76

Equity interests 42 71


Other assets 17 27

TOTAL TRUST ASSETS 1,943 1,469

Amounts owed to banks 159 235

Amounts owed to customers 1,314 714

Liabilities evidenced by certificates 308 327

Other liabilities 162 193

TOTAL TRUST LIABILITIES 1,943 1,469

Emoluments of members

of Bank Austria AG’s

Managing Board and

Supervisory Board

Loans and advances to

members of the Managing

Board and the Supervisory

Board of Bank Austria AG

(39) Trust business contained

in local financial statements


The following table gives a breakdown of securities pursuant to Section 64 of the Austrian

Banking Act:

The main differences between consolidated financial statements in accordance with IAS

and consolidated financial statements under Austrian generally accepted accounting principles

(Austrian Commercial Code / Austrian Banking Act) are as follows:

1) objective and content of financial statements in accordance with IAS,

2) formats for the balance sheet and the income statement,

3) recognition and valuation principles,

4) group of companies to be consolidated,

5) accounting for deferred taxes,

6) different assumptions used in calculating staff costs arising from pensions and similar

obligations,

7) separation of minority interests held outside the Group from shareholders’ equity,

8) more extensive disclosure requirements in the notes.

The objective of financial reporting in accordance with IAS is to provide information about, and

present fairly, the financial position and performance of the enterprise with a view to facilitating

investment decisions and enabling users to evaluate the results of the stewardship of management.

Under International Accounting Standards, this objective is met through timely, complete, trans-

parent and fair value-based reporting; determination of net income for the period on the accrual

basis of accounting; and a form of presentation that is in line with proper business management

principles. This enhances the international comparability of financial statements in accordance with

IAS, as against financial statements prepared in conformity with local accounting standards.

A cash flow statement is an integral part of financial statements prepared in accordance

with IAS.

(40) Breakdown of securities

pursuant to the

Austrian Banking Act

(41) Principal differences

between consolidated

financial statements in

accordance with IAS and

consolidated financial

statements under Austrian

generally accepted

accounting principles

1) Objective and content

of financial statements in

accordance with IAS

Breakdown of securities pursuant to Section 64 (1) items 10 and 11 of the Austrian Banking Act

as at 31 December 2000

of which: Total Totalvalued as other 2000 1999

5 m Unlisted Listed fixed assets valuation

Bonds and otherfixed-income securities 901 22,504 15,369 7,135 23,405 14,111

Shares and othervariable-yield securities 2,819 830 557 273 3,649 3,862

Equity interests 677 686 686 – 1,363 1,866

Shares in subsidiaries 1,084 161 161 – 1,245 983

TOTAL SECURITIES 5,480 24,182 16,774 7,408 29,662 20,822


Dividend payments are not determined or restricted by consolidated financial statements in

accordance with IAS. Profit distributions are always made on the basis of the separate financial

statements, prepared in accordance with local rules, of the company paying the dividend.

Purely tax-induced values are not allowed in financial statements prepared in accordance

with IAS. Tax effects are reflected in the tax expense for the period, including deferred taxes

(see 5 below), of the enterprise.

The notes to the financial statements contain disclosures and explanations providing users

with relevant information and enabling them to properly assess the development of the

enterprise during the reporting period (see 8 below).

International Accounting Standards do not set out compulsory formats for the balance

sheet and the income statement. The IAS rules usually contain minimum requirements and

leave it to the reporting enterprises to find the formats best suited to the objectives and

purposes of presenting information.

An obvious difference between financial statements in accordance with IAS and those

pursuant to the Austrian Banking Act is the compact presentation of the balance sheet and

the income statement, making them easier to read. This does not result in any loss of infor-

mation because the disclosure of numerous details, as well as additional breakdowns and

explanatory notes which are not given in respect of financial statements prepared pursuant

to the Austrian Commercial Code / Austrian Banking Act, significantly increases the content

of information provided to users. Total loan loss provisions are presented on the face of the

balance sheet, and the net charge for losses on loans and advances is disclosed in the income

statement, in addition to further details on credit risk given in the notes. All this provides a

considerably improved insight into the bank’s credit risk policy.

Financial reporting under Austrian law is guided by the principles of prudence, especially

the principle of recognising possible losses but not anticipating possible gains. This principle

is not applicable under the IAS rules.

Specific differences in individual items of the balance sheet and the income statement are

explained in the notes to these items.

All significant controlled companies must be consolidated in accordance with IAS. In

contrast to this, pursuant to Section 30 of the Austrian Banking Act, a controlled credit

institution which is not material to the consolidated financial statements must also be

consolidated. The provision of Section 30 of the Austrian Banking Act which restricts the

group of consolidated companies to near-financial companies is not applied for the purposes

of IAS-based consolidated financial statements. Financial companies which are not controlled

and in which the ultimate holding company of the Group holds only an indirect majority

interest, are not consolidated in accordance with IAS.

2) Formats for the

balance sheet and the

income statement

3) Recognition and valuation

principles

4) Consolidated companies

Compared with the group of companies to be consolidated under the Austrian Banking Act

rules, this leads to numerous changes, resulting from the non-inclusion of several banks and finan-

cial institutions because these are not material to the consolidated financial statements, and from

the inclusion of controlled real-estate subsidiaries and data-processing subsidiaries of Bank Austria

which meet the materiality criterion. The method used to account for investments in companies in

the consolidated financial statements is described in the section dealing with equity interests.

Under the IAS rules, differences between tax bases and amounts recognised in the balance

sheet in accordance with IAS, if these differences reverse in the future, require the recognition

of deferred tax assets or deferred tax liabilities, in the same way as current tax losses and tax

losses carried forward from previous periods. In contrast to this, under the rules of the

Austrian Commercial Code, deferred taxes can arise only from temporary differences between

accounting profit and taxable profit; only the net amount of deferred tax liabilities, if any,

must be recognised in the balance sheet.

The tax expense for the period thus comprises current tax payments made in the period

and changes in deferred tax assets and liabilities during the period.

Pension provision

The calculation of pension provisions pursuant to the Austrian Commercial Code is often

based on projected benefit valuation methods. IAS 19 requires the application of the projected

unit credit method.

The discount rate chosen for discounting the projected benefit obligation under com-

mercial law is often the same as that permitted for tax purposes. In accordance with IAS, the

discount rate is determined by reference to long-term market yields on corporate bonds or

government bonds.

Moreover, future salary increases resulting from career trends must be taken into account.

As the underlying variables used for calculation purposes differ, pension provisions set up in

accordance with IAS 19 are as a rule significantly higher than those pursuant to the Austrian

Commercial Code. Post-employment benefits also include the provision for severance payments.

In compliance with the IAS rules, interests in the capital of consolidated companies which are

not owned, directly or indirectly through subsidiaries, by the parent company are not shown as

a sub-item within consolidated shareholders’ equity but as a separate balance sheet item.

For the purposes of creating comparability and achieving a fair presentation of the finan-

cial position and performance, the IAS rules require detailed information and disclosures to be

given in the notes to the financial statements. Information to be presented as part of finan-

cial statements in accordance with IAS includes, for example, a statement of changes in

shareholders’ equity, segment reporting, and disclosures of the fair values of assets.


5) Accounting for

deferred taxes

6) Different assumptions used

in calculating staff costs

arising from pensions and

similar obligations

7) Minority interests held

outside the Group are not part

of shareholders’ equity

8) More extensive disclosures

required in the notes

The following tables show the capital requirements for the Bank Austria group of credit

institutions pursuant to Section 30 of the Austrian Banking Act as at the balance sheet date

of 1999 and 2000, as well as the various components of Bank Austria’s capital resources as

at the end of 1999 and 2000.

Capital resources and capital requirements

5 m 2000 1999

Core capital (Tier 1) 4,880 4,548Paid-in capital 829 671Capital reserve 2,172 2,080Revenue reserve* 191 463Reserve pursuant to Section 23 (6)of the Austrian Banking Act 1,441 1,181Untaxed reserves 127 135Differences on consolidation pursuant to Section 24 (2)of the Austrian Banking Act 572 330Fund for general banking risks – –

– Intangible assets – 452 –312

Supplementary elements (Tier 2) 3,821 2,789Undisclosed reserves – –Supplementary capital 1,310 303Participation capital – 6Revaluation reserve 209 206Subordinated capital 2,302 2,274Deductions – 481 –643

Net capital resources (Tier 1 and Tier 2) 8,220 6,694

Assessment basis (banking book) 79,783 77,116

Tier 1 capital ratio 6.1% 5.9%Total capital ratio 10.3% 8.7%

Tier 3 873 651

Requirement for the trading book 339 551

Open foreign exchange position 26 48

Requirement to be covered by Tier 3 365 599

*) including that part of the accumulated profit which is not intended for distribution

Capital requirements pursuant to the Austrian Banking Act

5 m Bank Austria GroupWeightings Assets and off-balance Weighted Required

sheet transactions amounts capital

0% 32,331

10 % 427 43 3

20 % 21,491 4,298 344

50 % 9,741 4,871 390

100% 62,119 62,119 4,970

Investment certificates 1,203 326 26

ASSETS – TOTAL 127,312 71,657 5,733

Financial derivative transactions 57,130 225 18

Other off-balance sheet transactions 27,856 7,901 632

BANKING BOOK – TOTAL 212,298 79,783 6,383


(42) Consolidated capital

resources and regulatory

capital requirements

177Concluding Remarks of the Managing Board of Bank Austria

Concluding Remarks of theManaging Board of Bank Austria

The Managing Board of Bank Austria has prepared the consolidated financial statements

as at 31 December 2000 in accordance with International Accounting Standards (IAS). These

consolidated financial statements meet the legal requirements for exemption from the

obligation to prepare consolidated financial statements under Austrian law and are consistent

with applicable EU rules.

The consolidated financial statements and the management report of the Group contain

all required disclosures; in particular, events of special significance which occurred after the

end of the financial year and other major circumstances that are significant for the future

development of the Group have been appropriately explained.

Vienna, 12 March 2001

The Managing Board

Randa(Chairman)

Samstag Haller(Deputy Chairman)

Hampel Hemetsberger

Kadrnoska Mendel

Werhahn-Mees Zwickl

178 Report of the Auditors

We have audited the consolidated financial statements prepared by Bank Austria AG as

at 31 December 2000, which comprise the balance sheet at 31 December 2000, the income

statement, the cash flow statement, the statement of changes in shareholders’ equity, and

the notes for the financial year beginning on 1 January 2000 and ending on 31 December

2000, as well as the comparative figures for the previous year. The Managing Board is respon-

sible for the preparation and content of the consolidated financial statements. Our responsi-

bility is to express an opinion on the consolidated financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing (ISA)

issued by the International Federation of Accountants (IFAC). Those standards require that

we plan and perform the audit to obtain reasonable assurance about whether the con-

solidated financial statements are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and

disclosures in the consolidated financial statements. An audit also includes assessing the

accounting policies applied and significant estimates made by the Managing Board, as well

as evaluating the overall consolidated financial statement presentation.

In relation to one significant foreign company (Banco BBA-Creditanstalt S.A., São Paulo,

Brazil) which is accounted for under the equity method, our opinion is based on the findings

of the audit by other independent auditors with adequate professional competence. We have

reviewed their opinion for plausibility. The contribution of this company to total assets is

1 342 m and its contribution to results is 1 65 m. We believe that our audit together with

the opinion of the other auditors provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements give a true and fair view of the

financial position of the Group as at 31 December 2000 and of the results of its operations

and its cash flows for the financial year beginning on 1 January 2000 and ending on

31 December 2000 in accordance with International Accounting Standards (IAS).

Pursuant to Austrian law (Section 59a of the Austrian Banking Act) it is our responsibility

to certify that the legal requirements for the preparation of consolidated financial statements

and a group management report in accordance with internationally accepted accounting

principles have been met, exempting a company from the obligation to prepare consolidated

financial statements pursuant to Austrian law. In this respect, we report as follows:

Report of the Auditors

Auditors’ report

179Report of the Auditors

We certify that the consolidated financial statements and the management report of the

Group are consistent with Council Directives 83/349/EEC and 86/635/EEC on consolidated

accounts (of banks). The required explanatory notes on accounting policies and consolidation

methods which differ from Austrian law are contained, and the overall presentation of the

consolidated financial statements and of the management report of the Group is equivalent

to the presentation pursuant to the Austrian Commercial Code and the Austrian Banking Act.

Thus the legal requirements for the preparation of consolidated financial statements and

a group management report in accordance with internationally accepted accounting

principles have been met, exempting Bank Austria from the obligation to prepare con-

solidated financial statements pursuant to Austrian law. The management report of the

Group for 2000 is consistent with the consolidated financial statements.


Savings Bank Auditing AssociationAuditing Board

Klaus Goschler Wolfgang Riedl

KPMG Austria GmbHWirtschaftsprüfungs- und Steuerberatungsgesellschaft

Gottwald Kranebitter Martin Wagner

Österreichische Wirtschaftsberatung GmbHWirtschaftsprüfungs- und Steuerberatungsgesellschaft

Philip Göth Wolfgang Gassner

180 Report of the Supervisory Board

For Bank Austria, the 2000 financial year was marked by the integration with

HypoVereinsbank and the related structural changes in the Group.

The company in its current legal form was established as Sparkasse Stockerau Aktien-

gesellschaft. Assuming the name of Bank Austria Aktiengesellschaft, it absorbed the banking

business of Bank Austria Aktiengesellschaft through universal succession as at 7 November

2000 when that business was spun off. At the same time, Bank Austria Creditanstalt Inter-

national AG as transferring company merged with the company.

The Supervisory Board of Bank Austria, in its meetings held on 10 August 2000,

21 August 2000 and 4 September 2000, dealt exclusively with the structural changes in the

group of credit institutions, in particular with the basic approval of the transaction, prepa-

ration of audit reports of the Supervisory Board, appointment of the auditors, and consent

to the exchange ratio of Bank Austria shares for HypoVereinsbank shares.

On 21 August 2000, the Supervisory Board of Sparkasse Stockerau Aktiengesellschaft

passed the resolutions required for the structural changes; the resolutions of the Supervisory

Board of Bank Austria Creditanstalt International AG were passed on 4 September 2000.

The structural changes were approved at the extraordinary general meetings of Bank

Austria on 27 September 2000, and of Sparkasse Stockerau on 26 September 2000.

In the financial year, the Supervisory Board of (the respective) Bank Austria Aktiengesell-

schaft held a total of eight meetings as well as a number of committee meetings. The Super-

visory Board was regularly informed by the bank’s Managing Board of the progress and status

of the company. In its meetings, the Supervisory Board performed all its duties as defined by

the law and the bye-laws. The same applies to the Supervisory Board of Sparkasse Stockerau

Aktiengesellschaft and the Supervisory Board of Bank Austria Creditanstalt International AG,

each of which held five meetings during the financial year until 6 November 2000.

Pursuant to a resolution passed at the extraordinary general meeting held on 26 Septem-

ber 2000, the members of the Supervisory Board of (the new) Bank Austria Aktiengesellschaft

were the same, from 4 November 2000, as the members of the Supervisory Board of Bank

Austria Aktiengesellschaft before the banking business was spun off. Friedel Neuber resigned

from the Supervisory Board on 6 November 2000, and Carlo Salvatori on 11 December 2000.

With effect from 4 December 2000, the Employees’ Council delegated Adolf Lehner as a

member of the Supervisory Board in place of Walter Schlögl.

At the extraordinary general meeting held on 29 December 2000, a resolution was passed

to reduce the number of Supervisory Board members to nine shareholder representatives and

five staff representatives. Since 1 January 2001, the Supervisory Board members representing

the shareholder have been Albrecht Schmidt as Chairman, Rudolf Humer as his deputy, Erich

Becker, Lino Benassi, Adolf Franke, Paul Hassler, Gerhard Mayr, Dieter Rampl and Eberhard

Rauch. The Supervisory Board members delegated by the Employees’ Council are Hedwig

Fuhrmann, Wolfgang Heinzl, Adolf Lehner, Wolfgang Lang and Thomas Schlager.

Report of the Supervisory Board

181Report of the Supervisory Board

In its meeting held on 6 November 2000, the Supervisory Board appointed Gerhard Randa

as Chairman of the Managing Board, Karl Samstag as his deputy, as well as Wolfgang Haller,

Erich Hampel, Friedrich Kadrnoska, Wolfram Littich, Michael Mendel (from 8 December

2000), Kai Werhahn-Mees (from 8 December 2000) and Franz Zwickl as members of the

Managing Board until 3 April 2005. Wilhelm Hemetsberger was appointed as a Managing

Board member with effect from 17 February 2001, replacing Wolfram Littich, who resigned

from the Managing Board on 16 February 2001.

The accounting records, the financial statements for 2000 and the management report

were audited by the Auditing Board of the Savings Bank Auditing Association, by KPMG Austria

GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft and by Österreichische

Wirtschaftsberatung GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft. As the

audit did not result in any objections and the legal requirements were fully complied with,

the auditors’ report was expressed without qualification.

The Supervisory Board has endorsed the findings of the audit, agrees with the financial

statements and the management report, including the proposal for the appropriation of

profits, presented by the Managing Board, and approves the 2000 financial statements, which

are thereby adopted pursuant to Section 125 (2) of the Austrian Joint Stock Companies Act.

The 2000 consolidated financial statements, including the notes, prepared in accordance

with International Accounting Standards (IAS) and the management report of the Group were

audited by the Auditing Board of the Savings Bank Auditing Association, by KPMG Austria

GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft and by Österreichische Wirt-

schaftsberatung GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft. The audit did

not result in any objections and the legal requirements were fully complied with. In the opinion

of the auditors, the consolidated financial statements give a true and fair view of the financial

position of the Group as at 31 December 1999 and as at 31 December 2000, and of the

results of its operations and its cash flows for the financial year beginning on 1 January 1999

and ending on 31 December 1999, and for the financial year beginning on 1 January 2000

and ending on 31 December 2000, in accordance with International Accounting Standards (IAS).

The auditors certify that the management report of the Group is consistent with the

consolidated financial statements and that the legal requirements for exemption from the

obligation to prepare consolidated financial statements pursuant to Austrian law are met.

The Supervisory Board has endorsed the findings of the audit.


The Supervisory Board

Albrecht SCHMIDTChairman of the Supervisory Board

184 Glossary

Glossary

Assessment basis as defined

in the Austrian Banking Act

Important concepts and terms used in this Annual Report are explained and defined

below.

This is the sum of assets, off-balance sheet positions and special off-balance sheet positions

related to the banking book and weighted by transaction/counterparty risk, calculated in

accordance with Austrian banking supervision rules. See also risk-weighted assets.

The Austrian Banking Act as amended.

The Austrian Commercial Code as amended.

Branches, other business units providing direct customer services, and representative offices

of all financial companies in the Bank Austria Group.

Capital resources comprise paid-in capital, earned capital as well as differences and minority

interests resulting from capital consolidation (= core capital / Tier 1), supplementary and

subordinated capital (supplementary elements / Tier 2) and re-classified Tier 2 capital (= Tier 3

capital).

Equity interests in such companies are stated in the consolidated balance sheet at the share

of net assets including any goodwill. The share of profits or losses is included in the con-

solidated income statement.

These are significant controlled companies whose assets, liabilities, income and expenses are,

after eliminations, included in the consolidated financial statements of Bank Austria.

Paid-in capital and reserves as well as differences arising on capital consolidation, less

intangible assets.

The (proposed) dividend per share.

Consolidated net income (in 1999 less amounts distributable to holders of participation

certificates) divided by the average number of shares outstanding.

In its trading portfolio, the bank temporarily holds its own shares only in its capacity as

market maker to ensure the Vienna Stock Exchange’s ability to function. Therefore such

shares are treated as shares outstanding.

For details on the method of calculation, see note 9.

Austrian Banking Act

Austrian Commercial Code

Business units of the

Bank Austria Group

Capital resources

Companies accounted for

under the equity method

Consolidated companies

Dividend per share

Earnings per share

Core capital (Tier 1)

185Glossary

The market value of all Bank Austria shares – and, in the previous year, Bank Austria

participation certificates – as at year end.

In the capital resources table, net capital resources include only Tier 1 and Tier 2 capital and

deductions. Net capital resources cover the capital requirement for the banking book

(solvency) and are used as a regulatory measure for limiting large exposures and for other

regulatory standards.

Tier 3 capital can only be used to cover the regulatory capital requirement for the trading

book and for the open foreign exchange position pursuant to the Austrian Commercial Code.

The price of ordinary shares – and, in the previous year, participation certificates – as at year

end, divided by earnings per share.

Total of assets weighted by counterparty risk (banking book). See also assessment basis as

defined in the Austrian Banking Act.

Consolidated net income after taxes divided by average total assets.

Consolidated net income after taxes divided by average shareholders’ equity.

The ratio resulting from the division of Tier 1 capital by the assessment basis (with respect to

the banking book).

– Companies which are controlled and significant are included in the group of consolidated

companies (see above).

– Financial companies which are not controlled but significant, and in which significant

influence can be exercised, are accounted for under the equity method (see above).

– Investments in all other companies are stated in the balance sheet at book value. Dividends

paid by such companies are reflected in the income statement.

Net capital resources

Price/earnings ratio

Risk-weighted assets

ROA (return on assets)

ROE (return on equity)

Tier 1 capital ratio

Valuation of equity interests

Market capitalisation

186

187Quarterly Data

Balance sheet

At end of quarter 31 Dec. 2000 30 Sept. 2000 30 June 2000 31 March 20005 m 5 m 5 m 5 m

Assets

Cash and balances with central banks 1,623 636 874 1,182

Loans and advances to, and placements with, banks 39,417 31,799 33,409 29,990

Loans and advances to customers 82,320 81,856 77,329 77,881

– total loan loss provisions – 2,856 – 2,432 – 2,463 – 2,393

Trading assets 14,256 11,303 10,059 10,242

Other current financial assets 3,751 3,825 3,796 3,892

Financial fixed assets 22,431 22,707 22,713 21,939

Intangible assets 642 673 687 701

Property and equipment 1,248 1,094 1,101 1,128

Other assets 2,188 2,529 2,029 2,639

TOTAL ASSETS 165,019 153,989 149,534 147,201


Amounts owed to banks 59,105 53,694 58,852 57,322

Amounts owed to customers 53,047 47,880 46,006 43,527

Liabilities evidenced by certificates 31,283 32,512 26,893 27,211

Provisions 2,972 3,123 3,113 3,120

Other liabilities 8,299 7,265 5,731 7,384

Subordinated capital 5,030 4,528 4,074 3,696

Minority interests 669 404 398 392

Shareholders’ equity 4,615 4,583 4,469 4,549

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 165,019 153,989 149,534 147,201

Income statement

By quarter Q 4 2000 Q 3 2000 Q 2 2000 Q 1 20005 m 5 m 5 m 5 m

Net interest income 635 547 557 501

Losses on loans and advances 307 134 118 107

Net fee and commission income 235 215 204 208

Net trading result – 18 27 33 95

General administrative expenses 540 542 536 541

Result of other operating activities 143 63 25 17

Net income before taxes 148 176 165 173

Taxes on income 17 – 26 – 14 – 24

Net income after taxes 165 150 151 149

Minority interests 1 8 7 7

CONSOLIDATED NET INCOME 164 143 143 142

Quarterly Data

188 Supervisory Board and Managing Board of Bank Austria Aktiengesellschaft

On 7 November 2000, the business operations of Bank Austria (old) werespun off into Sparkasse Stockerau AG, whose name was subsequently changedto Bank Austria (new).

Supervisory Board of Bank Austr ia (old)

Siegfried SellitschChairman of the Managing Board,Wiener Städtische Allgemeine Versicherung Aktiengesellschaft

Walter NettigPresident of the Vienna Chamber of Commerce

Rudolf HumerChairman of the Managing Board, P Beteiligungs Aktiengesellschaft

Erich BeckerChairman of the Managing Board, VA Technologie AG

Dieter FalkeMember of the Managing Board, Westdeutsche Landesbank Girozentrale(until 29 February 2000)

Adolf FrankeMember of the Managing Board, Westdeutsche Landesbank Girozentrale(since 26 May 2000)

Günther W. HavranekTax Consultant, Certified Public Accountant

Ewald KlingerManaging Director, Entsorgungsbetriebe Simmering Ges.m.b.H.


Friedel NeuberChairman of the Managing Board, Westdeutsche Landesbank Girozentrale

Walter Petrak

Carlo SalvatoriManaging Director and CEO, Banca Intesa SpA

Helmut Andreas Schuster

Willem A. WielensCEO, Philips Regional Headquarters Western Europe, Middle East & Africa

Hedwig FuhrmannChairman of the Employees’ Council


Kornelia Urban Second Deputy Chairman of the Employees’ Council

Heribert KruschikMember of the Employees’ Council



Walter SchlöglMember of the Employees’ Council

Supervisory Board and Managing Boardof Bank Austria Aktiengesellschaft

Chairman

First Deputy Chairman

Second Deputy Chairman

Members

Appointed by theEmployees’ Council

189Supervisory Board and Managing Board of Bank Austria Aktiengesellschaft

Supervisory Board of Bank Austr ia (new)*

Siegfried SellitschChairman of the Managing Board,Wiener Städtische Allgemeine Versicherung Aktiengesellschaft

Walter NettigPresident of the Vienna Chamber of Commerce




Günther W. HavranekTax Consultant, Certified Public Accountant

Ewald KlingerManaging Director, Entsorgungsbetriebe Simmering Ges.m.b.H.


Walter Petrak

Carlo SalvatoriManaging Director and CEO, Banca Intesa SpA (until 11 December 2000)

Helmut Andreas Schuster

Willem A. WielensCEO, Philips Regional Headquarters Western Europe, Middle East & Africa



Adolf LehnerSecond Deputy Chairman of the Employees’ Council (since 4 December 2000)

Kornelia Urban Third Deputy Chairman of the Employees’ Council

Heribert KruschikMember of the Employees’ Council



Walter SchlöglMember of the Employees’ Council (until 4 December 2000)

Chairman

First Deputy Chairman

Second Deputy Chairman

Members


* Supervisory Board of Sparkasse Stockerau AG: Herbert Masopust (Chairman), Johannes Raul (Deputy Chairman), Ilse Fürst, Ernst Mehlgarten, Rudolf Piber, Rudolf Richentzky, Andrea Stefanek, Martin Gramer, Alfred Zwettler

190 Supervisory Board and Managing Board of Bank Austria Aktiengesellschaft

Supervisory Board s ince 1 January 2001

Albrecht SchmidtSpokesman of the Board of Managing Directors,Bayerische Hypo- und Vereinsbank AG



Lino BenassiManaging Director and CEO, Banca Intesa S.p.A.


Paul HasslerCertified Public Accountant


Dieter RamplMember of the Board of Managing Directors,Bayerische Hypo- und Vereinsbank AG

Eberhard Rauch Member of the Board of Managing Directors,Bayerische Hypo- und Vereinsbank AG



Adolf LehnerSecond Deputy Chairman of the Employees’ Council

Kornelia Urban Third Deputy Chairman of the Employees’ Council (until 16 January 2001)

Heribert KruschikMember of the Employees’ Council (until 16 January 2001)



Representatives of the Supervisory Authorities

Rudolf Glöckel

Josef Kramhöller

Doris Radl

Bernhard Bauer

Alfred Katterl

Christian Wenth

Günther Pullez

Alois Ramoser


Chairman

Deputy Chairman

Members

* Commissioner for Sparkasse Stockerau: Waltraud Müllner-Toifl

for Bank Austria (old)Commissioner

Deputy Commissioner

for Bank Austria (new)*Commissioner

Deputy Commissioner

for Bank Austria (old and new)State Cover Fund Controller

Deputy State Cover Fund Controller

Trustee pursuant to Mortgage Bond Act

Deputy Trustee pursuant to MortgageBond Act

191Supervisory Board and Managing Board of Bank Austria Aktiengesellschaft

Managing Board of Bank Austr ia (old)

Gerhard Randa

Karl Samstag

Heinrich Gehl

Wolfgang Habermayer(since 4 April 2000)

Wolfgang Haller

Friedrich Kadrnoska

Wolfram Littich(since 4 April 2000)

Gerhard Novy(until 3 April 2000)

Franz Zwickl

Managing Board of Bank Austr ia (new) s ince 6 November 2000*

Gerhard Randa

Karl Samstag

Erich Hampel

Wilhelm Hemetsberger(since 17 February 2001)

Wolfgang Haller

Friedrich Kadrnoska

Wolfram Littich(until 16 February 2001)

Michael Mendel(since 8 December 2000)

Kai Werhahn-Mees (since 8 December 2000)

Franz Zwickl

Chairman andChief Executive Officer

Deputy Chairman and Deputy Chief Executive Officer

Members

Chairman andChief Executive Officer

Deputy Chairman and Deputy Chief Executive Officer

Members

* Managing Board of Sparkasse Stockerau AG:Karl Seliger (Chairman), Robert Ahlfeld

A-1030 Vienna, Vordere Zollamtsstrasse 13Tel.: (+43 1) 711 91-0Fax: (+43 1) 711 91-56 155Internet: http://www.bankaustria.come-mail: [email protected]

A-1010 Vienna, Am Hof 2Tel.: (+43 1) 711 91-0

City CentreA-1010 Vienna, Am Hof 2Tel.: (+43 1) 711 91-0

North-EastA-1210 Vienna, Schwaigergasse 30Tel.: (+43 1) 711 91-0

North-WestA-1020 Vienna, Negerlegasse 10Tel.: (+43 1) 711 91-0

South-EastA-1030 Vienna, Vordere Zollamtsstrasse 13Tel.: (+43 1) 711 91-0

South-WestA-1120 Vienna, Schönbrunner Strasse 222–228Tel.: (+43 1) 711 91-0

WestA-1070 Vienna, Neubaugasse 1Tel.: (+43 1) 711 91-0

BurgenlandA-1030 Vienna, Landstrasser Hauptstrasse 1Tel.: (+43 1) 711 91-0

Carinthia/East TyrolA-9500 Villach, Hans-Gasser-Platz 8Tel.: (+43 4242) 2022-0

Lower Austria/South-EastA-2340 Mödling, Enzersdorfer Strasse 4 Tel.: (+43 1) 711 91-0

Lower Austria/WestA-3100 St. Pölten, J.-Raab-Promenade 27Tel.: (+43 2742) 399-0

Upper AustriaA-4021 Linz, J.-K.-Vogel-Strasse 7–9Tel.: (+43 7232) 7630-0

SalzburgA-5020 Salzburg, Faberstrasse 10Tel.: (+43 662) 8690-0

StyriaA-8011 Graz, Am Eisernen Tor 1Tel.: (+43 316) 8043-0

TyrolA-6021 Innsbruck, Museumstrasse 20Tel.: (+43 512) 5353-0

VorarlbergA-6900 Bregenz, Kornmarktplatz 2Tel.: (+43 5574) 4955-0

Amstetten, Angern, Arnoldstein, Auersthal,Bad Bleiberg, Bad Sauerbrunn, Baden,Bludenz, Bregenz, Bruck/Mur, Bruckneudorf,Brunn/Gebirge, Deutschkreutz, DeutschWagram, Dornbirn, Drobollach, Eberndorf,Eisenkappel, Eisenstadt, Feistritz/Drau, Feldkirch, Fohnsdorf, Fürnitz, Gänserndorf,Garsten, Gmünd (2), Gols, Graz (8), Griffen,Groß-Enzersdorf, Großpetersdorf, Gumpolds-kirchen, Guntramsdorf, Hallein, Hausleiten,Heidenreichstein, Hinterbrühl, Horn, Innsbruck(3), Judenburg, Kapfenberg, Klagenfurt (2),Klosterneuburg (3), Knittelfeld, Kohfidisch,Krems, Kufstein, Leoben, Leopoldsdorf imMarchfeld, Lienz, Linz (5), Marchegg, Maria

Enzersdorf, Mattersburg, Matzen, Mauerbach,Mistelbach, Mödling (2), Murdorf, Neudörfl/Leitha, Neunkirchen, Neuzeug, Niederfella-brunn, Nötsch/Gailtal, Obdach, Oberpullen-dorf, Oberschützen, Oberwart, Orth/Donau,Perchtoldsdorf, Pöls, Pressbaum, Purkersdorf,Radenthein, Ried/Innkreis, Riezlern, Salzburg(3), Schrems, Schwaz, Schwechat, Sierning,Spillern, Spittal/Drau, Stegersbach, Steyr (5),Stockerau, Strasshof, St. Pölten (3), Traun,Tulln, Untersiebenbrunn, Velden, Villach (10),Vöcklabruck, Völkermarkt, Vösendorf (2),Waidhofen/Ybbs, Weiz, Wels, Vienna (131),Vienna International Airport, Wolfsberg, Wörgl, Wr. Neudorf, Wr. Neustadt, Zell/See.

Bank Austria Group Offices

Bank Austria AG in Austria

Head OfficeCustomer service centres

Regional off ices in Vienna

Regional off ices in thefederal provinces of Austr ia

Branches*

* as at 31 December 2000 193

A-1010 Vienna, Schottengasse 6Tel.: (+43 1) 531 31-0Fax: (+43 1) 531 31-47 566Internet: http://www.creditanstalt.co.ate-mail: [email protected]

City CentreA-1010 Vienna, Schottengasse 6Tel.: (+43 1) 531 31-0

CentralA-1040 Vienna, Frankenberggasse 13Tel.: (+43 1) 505 05 91-0

NorthA-1210 Vienna, Schwaigergasse 30Tel.: (+43 1) 277 52-0

South/WestA-1120 Vienna, Krichbaumgasse 33Tel.: (+43 1) 811 27-0

SchottengasseA-1010 Vienna, Schottengasse 6Tel.: (+43 1) 531 31-0

City Centre/SouthA-1010 Vienna, Schubertring 14Tel.: (+43 1) 515 12-0

Central/WestA-1070 Vienna, Mariahilfer Strasse 54Tel.: (+43 1) 521 05-0

NorthA-1210 Vienna, Am Spitz 3Tel.: (+43 1) 277 27-0

BurgenlandA-7000 Eisenstadt, Pfarrgasse 28Tel.: (+43 26 82) 690-0

CarinthiaA-9020 Klagenfurt, Burggasse 4Tel.: (+43 463) 58 44-0

Lower Austria NorthA-3100 St. Pölten, Kremsergasse 39Tel.: (+43 27 42) 390-0

Lower Austria SouthA-2700 Wr. Neustadt, Kollonitschgasse 1Tel.: (+43 26 22) 301-0

Upper AustriaA-4021 Linz, Hauptplatz 27Tel.: (+43 732) 76 61-0

SalzburgA-5027 Salzburg, Rainerstrasse 2Tel.: (+43 662) 86 88-0

StyriaA-8010 Graz, Herrengasse 15Tel.: (+43 316) 80 45-0

TyrolA-6020 Innsbruck, Maria-Theresien-Strasse 36Tel.: (+43 512) 53 00-0

VorarlbergA-6900 Bregenz, Rathausstrasse 6Tel.: (+43 55 74) 402-0

Creditanstalt AG in Austria

Head Office

Regional off ices in Vienna Private Customersand Professionals

Regional off ices in Vienna Corporate Customers

Regional off ices in the federal provincesof Austr iaPrivate Customersand Professionals

Regional off ices in the federal provincesof Austr iaCorporate Customers

BurgenlandA-7000 Eisenstadt, Pfarrgasse 28Tel.: (+43 26 82) 690-0

CarinthiaA-9020 Klagenfurt, Burggasse 4Tel.: (+43 463) 58 44-0

Lower AustriaA-3100 St. Pölten, Kremsergasse 39Tel.: (+43 27 42) 390-0

Upper AustriaA-4021 Linz, Hauptplatz 27Tel.: (+43 732) 76 61-0

SalzburgA-5027 Salzburg, Rainerstrasse 2Tel.: (+43 662) 86 88-0

StyriaA-8010 Graz, Herrengasse 15Tel.: (+43 316) 80 45-0

TyrolA-6020 Innsbruck, Maria-Theresien-Strasse 36Tel.: (+43 512) 53 00-0

VorarlbergA-6900 Bregenz, Rathausstrasse 6Tel.: (+43 55 74) 402-0

194

Selected subsidiaries and equity interests of Bank Austria AG and Creditanstalt AG in Austria

Adria Bank AGA-1010 Vienna, Tegetthoffstrasse 1Tel: (+43 1) 514 09-0Asset Management GmbHA-1020 Vienna, Obere Donaustrasse 19Tel: (+43 1) 331 47-0B.A.I. Bauträger Austria Immobilien GmbH*A-1020 Vienna, Obere Donaustrasse 21Tel: (+43 1) 331 46-0Internet: http://www.bai.atBank Austria Creditanstalt Leasing GmbHA-1041 Vienna, Operngasse 21Tel.: (+43 1) 588 08-0Internet: http://www.leasaustria.com(Offices in Vienna, Dornbirn, Graz, Innsbruck, Linz,Salzburg and Villach; subsidiaries in Argentina,Croatia, the Czech Republic, Germany, Hungary,Italy, Poland, Slovakia and Slovenia as well as arepresentative office in Romania)

Bank Austria Handelsbank AGA-1015 Vienna, Operngasse 6Tel: (+43 1) 514 40-0Bank Austria Treuhand AGA-1020 Vienna, Obere Donaustrasse 19Tel: (+43 1) 331 71-0Bank Austria Wohnbaubank AGA-1010 Vienna, Renngasse 2Tel: (+43 1) 711 91-55 662BANKPRIVAT AGA-1010 Vienna, Hohenstaufengasse 6Tel: (+43 1) 53 740-0Internet: http://www.bankprivat.atCAPITAL INVEST GmbHA-1020 Vienna, Obere Donaustrasse 19Tel: (+43 1) 331 73-0Internet: http://www.capitalinvest.co.atEkazent Immobilien Management GmbH*A-1220 Vienna, Siebeckstrasse 7Tel: (+43 1) 201 22-0Internet: http://www.ekazent.atInformations-Technologie Austria GmbHA-1020 Vienna, Lassallestrasse 5Tel: (+43 1) 217 17-0Internet: http://www.it-austria.comRINGTURM Kapitalanlagegesellschaft m.b.H.A-1010 Vienna, Schottenring 30Tel: (+43 1) 535 54 18Internet: http://www.ringturm.atUnion Versicherungs-AGA-1010 Vienna, Schottenring 30Tel: (+43 1) 313 83-0VISA-SERVICE Kreditkarten AGA-1030 Vienna, Invalidenstrasse 2Tel: (+43 1) 711 11-0Internet: http://www.visa.at

AWT Internationale Handels undFinanzierungs AGA-1013 Vienna, Hohenstaufengasse 6Tel: (+43 1) 531 31-43250Internet: http://www.awt.at(10 subsidiaries in Bulgaria, Croatia, Germany,Hungary, Macedonia, Poland, Serbia, Singapore,Slovakia and Ukraine)

Bank für Kärnten und Steiermark AGA-9020 Klagenfurt, St. Veiter Ring 43Tel: (+43 463) 58 58-0Internet: http://www.bks.at(38 offices in Austria; 2 representative offices inCroatia and Slovenia)

Bank für Tirol und Vorarlberg AGA-6020 Innsbruck, Erlerstrasse 5-9Tel: (+43 512) 53 33-0Internet: http://www.btv.at(35 offices in Austria; 1 representative office inItaly)

CA Bau-Finanzierungsberatung GmbHA-1190 Vienna, Hutweidengasse 22Tel: (+43 1) 369 16 45-0Internet: http://www.cabfb.atCA Versicherung AGA-1010 Vienna, Gonzagagasse 16 Tel: (+43 1) 531 45-0Internet: http://www.ca-versicherung.atDiners Club Austria AGA-1041 Vienna, Rainergasse 1Tel: (+43 1) 501 35-0Internet: http://www.dinersclub.atFactorBank AG A-1041 Vienna, Floragasse 7Tel: (+43 1) 506 78-0Internet: http://www.factorbank.comM.A.I.L Finanzberatung GmbHA-1010 Vienna, Schottengasse 6-8Tel: (+43 1) 531 31-42290Internet: http://www.mailfinanz.comOberbank AGA-4020 Linz, Hauptplatz 10-11Tel: (+43 732) 78 02-0Internet: http://www.oberbank.at(94 offices in Austria and 4 offices in Germany, 2 representative offices in the Czech Republicand in Hungary)

Österreichische Hotel- und Tourismusbank GmbHA-1011 Vienna, Parkring 12aTel: (+43 1) 515 30-0Internet: http://www.oeht.atWAVE Solutions Information Technology GmbHA-1090 Vienna, Nordbergstrasse 13Tel: (+43 1) 717 30-0Internet: http://www.wave-solutions.at

195* held via the real estate foundation

BulgariaBank Austria AGSofia Representative OfficeBG-1040 Sofia, Blvd. Dragan Tsankov 36World Trade Center Interpred BLB. Rm. 615Tel.: (+359 2) 971 2580

CroatiaBank Austria Creditanstalt Croatia d.d.HR-10000 Zagreb, Jurisiceva 2Tel.: (+385 1) 48 00 777Internet: http://www.baca.hr(branches in Dubrovnik, Rijeka, Split, Zadar, Zagreb)

Czech RepublicBank Austria Creditanstalt Czech Republic a.s.CZ-11005 Praha 1, Revolucní 7, P.O. Box 18Tel.: (+420 2) 2285 3111Internet: http://www.ba-ca.cz(branches in Brno, Ceské Budejovice, HradecKrálové, Karlovy Vary, Novy Bor, Ostrava, Plzen,Prague, Zlín)

HungaryBank Austria Creditanstalt Hungary Rt.H-1054 Budapest, Akadémia u. 17Tel.: (+36 1) 301 1300Internet: http://www.baca.hu(branches in Békéscsaba, Budaörs, Budapest,Debrecen, Györ, Kecskemét, Kaposvár, Miskolc,Mosonmagyarovar, Nyíregyháza, Pécs, Sopron,Szeged, Székesfehérvár, Szolnok, Szombathely,Tatabánya, Veszprém, Zalaegerszeg)

PolandPowszechny Bank Kredytowy S.A.PL-00-958 Warszawa, Towarowa Str. 25A,P.O. Box 3Tel.: (+48 22) 531 8000PL-00-113 Warszawa, ul. Emilii Plater 53,Fl. 28, Warsaw Financial CenterTel.: (+48 22) 520 9000Internet: http://www.pbk.pl(343 branches concentrated in the regions aroundWarsaw, Katowice, Szczecin, Poznan’ , Gdan’skas well as Central and North Eastern Poland)

RomaniaBank Austria Creditanstalt Romania S.A.RO-71278 Bucuresti 1,Strada Dr. Grigore Mora No. 37Tel.: (+40 1) 203 2222Internet: http://www.baca.ro(branches in Bucharest)

RussiaCB Bank Austria Creditanstalt Russia ZAORF-109017 Moscow, 1st Kazachy Pereulok 9Tel.: (+70 95) 956 3000e-mail: [email protected](branches in Moscow)

SlovakiaBank Austria Creditanstalt Slovakia a.s.SK-814 16 Bratislava, Mostová 6Tel.: (+42 17) 5969 1111Internet: http://www.baca.sk(branches in Bratislava, Kosice, Banská Bystrica)

SloveniaBank Austria Creditanstalt d.d. LjubljanaSLO-1000 Ljubljana, Wolfova 1Tel.: (+386 1) 4777 600Internet: http://www.ba-ca.si(branches in Koper, Ljubljana, Maribor, MurskaSobota)

UkraineJSCB “Bank Austria Creditanstalt Ukraine”Kyiv, 01034 Ukraine, 14-A, Yaroslaviv valTel.: (+380 44) 230 33 00(branch in Kiev)


International network*

CA IB Investmentbank AGA-1010 Vienna, Nibelungengasse 15Tel.: (+43 1) 588 84-0Fax: (+43 1) 585 42 42Internet: http://www.ca-ib.come-mail: [email protected](business units in Bulgaria, Croatia, the CzechRepublic, Hungary, Poland, Romania, Slovakia,Slovenia, Ukraine and the United Kingdom;representative offices in France, Germany, Israel,Italy, Lithuania, Turkey, Yugoslavia)

* selected branches, representative offices and banking subsidiaries as at 28 February 2001196

ChinaBank Austria AGBeijing Representative Office100026 Beijing, Chaoyang DistrictLandmark Tower, Unit 1605, 8 North Dongsanhuan RoadTel.: (+86 10) 659 00 546

Hong Kong SAR, P.R.ChinaBank Austria AGHong Kong BranchCentral Hong Kong, Two Exchange Square,41F, 8 Connaught PlaceTel.: (+85 2) 28 68 3111

JapanBank Austria AGTokyo Representative OfficeTokyo 100-0011, Imperial Tower 6F, 1-1-1,Uchisaiwaicho, Chi-ku

SingaporeBank Austria AGSingapore BranchSingapore 049712, 30 Cecil Street,25-01 Prudential TowerTel.: (+65) 438 48 00

South AfricaBank Austria AGJohannesburg Representative OfficeBox 97 686Petervale 2151South AfricaTel.: (+27 82) 330 1820

America

Western Europe

ArgentinaBanco B.I. Creditanstalt S.A., Buenos AiresRA-1106 Buenos Aires, Bouchard 547,24th/25th FloorTel.: (+54 11) 4319 8277

BrazilBanco BBA Creditanstalt S.A., São Paulo01311-902 São Paulo,Avenida Paulista, 37, 10th-20th FloorTel.: (+55 11) 281 8000

Asia/Africa

BelgiumBank Austria AG Brussels Representative OfficeB-1000 Brussels, Avenue de Cortenbergh 89Tel.: (+32 2) 735 41 22

FranceBank Austria AGParis Representative OfficeF-75001 Paris, 7, Place VendômeTel.: (+33 1) 42 60 70 80

GermanyBank Austria Creditanstalt Deutschland AGD-80333 München, Brienner Strasse 9Tel.: (+49 89) 290 745 0(branch in Berlin)

ItalyBank Austria AGMilan BranchI-20123 Milano, Via Cordusio 2Tel.: (+39 02) 723 231

SpainBank Austria AGMadrid Representative OfficeE-28010 Madrid, Fernando El Santo 3Tel.: (+34 91) 31 93 900

SwitzerlandBank Austria Creditanstalt (Schweiz) AGCH-8039 Zürich, Bleicherweg 18Tel.: (+41 1) 283 83 83e-mail: [email protected]: http://www.ba-ca.ch

Finacon H. Belz AGCH-8501 Frauenfeld, Zürcherstrasse 149Tel.: (+41 52) 722 29 91Fax: (+41 52) 721 43 30

United KingdomBank Austria AGLondon BranchUK-London, EC2Y 5 DD, 125 London Wall,11th FloorTel.: (+44 207) 600 1555

BA/CA Asset Finance Ltd.UK-Glasgow G2 8PJ, Carrick House, 40, Carrick StreetTel.: (+44 141) 221 8471

Cayman IslandsBank Austria Cayman Islands Ltd.Georgetown, Grand CaymanTwo Artillery Court, Shedden RoadTel.: (+1 345) 949 3800

United StatesBank Austria Creditanstalt American CorporationNew York, NY 10167, 245 Park AvenueTel.: (+1 212) 856 1048

197

Published by:

Bank Austria Aktiengesellschaft

A-1030 Vienna, Vordere Zollamtsstrasse 13Telephone (+43 1) 711 91 0Fax (+43 1) 711 91 56 155Telex 115561 BACA ASwift BKAUATWW

A-1010 Vienna, Am Hof 2Telephone (+43 1) 711 91 0Fax (+43 1) 711 91 56 149Telex 115561 BACA ASwift BKAUATWW

Bank Austria in the Internet: www.bankaustria.com

Group Internal Communications (GIC):

e-mail: [email protected]

Photographs:

Günther Parth (Managing Board)Buenos Dias, Image bank, Mauritius, Pix, RO-CA, Tony Stone

Graphics:

Basic design: FINE LINELayout: Horvath

Printed by:

Leykam Druck Ges.m.b.H., Werk Gutenberg A-2700 Wiener Neustadt

The Annual Report is available from:

Bank Austria AGGroup Public RelationsP.O.Box 35, A-1011 Vienna

Telephone (+43 1) 711 91 56 141Fax (+43 1) 711 91 56 149e-mail: [email protected]: www.bankaustria.com

198

Bank Austria Annual Report 2000

Documents